Very few people have the cash ‘lying around’ to purchase a vehicle outright, and most of the time we need to organise financing to be able to afford our new wheels. Buying a car is a huge deal, and vehicle finance companies or banks will do their best to make it as attractive as possible for you to take out finance through them.
They will make it interesting by offering things like ‘first year interest free’ or by offering extended warrantees. It is however quite easy to lose as much in the long run as you are told to ‘gain’ with offers like these. Make sure you are aware of the following common mistakes people make when getting vehicle finance.
Don’t share your decision making process with your dealer. Yet.
When we consider vehicle finance, we often discuss with our dealers on how we intend to pay for our new or used car. But the sensible thing to do is keep your thoughts to yourself until price negotiations are completed. By financing your car through the dealer, they get a commission.
If your car dealer assumes that you will be taking out vehicle finance via his dealership, he may very well give you a better deal, factoring in compensation for his ‘loss’ by focusing on the monthly installments instead of on the actual price of the car. This will influence the negotiating process, and not necessarily in your favour. By disclosing the type of financing you have in mind, you will deny yourself the chance to find better deals.
Don’t forget that there are several options
Another mistake we make is that we often don’t consider alternative options when it comes to vehicle financing. It is a good idea to shop around a bit before committing to finance through your dealership. Check with your bank, or go online to do some research into the best options. As soon as you find the best deals on your vehicle finance, ask for a letter which confirms the pre-approved amount, and then start the price negotiations.
Don’t be fooled by ‘interest free’ deals
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We also tend to overlook the importance of scrutinising the one year interest free finance deals we see. You need to realise that, in order to be able to offer a deal like this, car dealers or motor vehicle finance companies will make sure they make up for that lost interest in the following years.
Don’t immediately jump at extended warrantee offers
Watch out for those attractive ‘extended warrantee’ offers. They may sound like a sensible option, and in some cases it is worth considering, but make absolutely sure whether or not you in fact need extended warrantee, especially when you plan to replace or trade in your vehicle around the time the standard warrantee lapses.
Don’t close your eyes to possible hidden fees
Before signing your vehicle finance contract, make sure that you read everything carefully, especially when it comes to ‘hidden fees’ such as admin or application fees and any other types of fees that often find their way into a contract. You want your contract to be clear and completely transparent. If there are some aspects of the contract that are not clear, ask questions.
