80-90% of new cars were purchased via financing plans in recent years. We simply can’t afford to keep up with the costs of big vehicle manufacturers. So, we’re choosing the more affordable route instead.
However, if you’re wary of your money, financing can seem like a big risk, especially as more and more financing scandals come to the fore. How can you possibly commit to something that could end up costing you a significant amount more in the long run?
We understand your concerns, but the reality is that financing can still be a great affordable option. You simply need to take the following steps to ensure that’s the case.
Step 1: Understand Your Options
Personal contract purchase (PCP) and hire purchase (HP) are probably the most common types of car financing for benefits like the fact that they typically allow you to own that vehicle at the end of your finance term. However, both PCP and HP financing deals tend to be across long terms. They also typically have the highest monthly price points.
If PCP and HP don’t feel like a good fit, then there are alternatives to consider, such as seeking a personal loan with your bank, or 0% finance plans that are interest-free thanks to large down payments.
There is no ‘right’ option, but considering these choices ensures you can choose a financing plan that you feel comfortable with based on things like affordability, whether or not you want to own a car, and even who you’ll ultimately owe money to.
Step 2: Know What To Be Wary Of
It’s no secret that the car financing world has been prone to scandal in recent years, with dealerships particularly coming under fire for things like mis-sold PCP policies. Car owners have received sizable reimbursements on Fiat, Honda, and Mercedes PCP claims amongst others due to issues with discretionary commission.
This highlights the need to be wary when approaching any financing dealership. But, what do you need to look out for? Largely you need to stay switched on regarding what your dealer shares with you.
A good guide here is that, if you don’t understand a financing deal, it’s probably not right. A trustworthy finance arrangement should be fully visible across everything from overall costs to commission bands and more. If information is lacking, then it’s time to look elsewhere.
Step 3: Have a Term in Mind
Car financing terms can stretch from 12 months to five years, and there are different benefits to each. A 12-month term can see you owning your vehicle sooner but the monthly costs involved can be steeper. Meanwhile, a five-year term could cost more overall but ensures affordable monthly payments.
Choosing a term before you arrive to sign a financing deal ensures that you make the best decision for you, without letting a dealer who’s on commission sway you. This guarantees that your financing option is the best financial choice, whatever that might look like.
The world of car financing can feel like a minefield, but it is possible to keep yourself safe using these tips.
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