When Should you Take a Car Loan From a Dealer?

Many people that buy cars tend to use a loan to pay for them. Whether you are buying a new or second hand car, the cost can be very big and this means that you often will not have the money to pay for it and therefore need to borrow. Many people choose to avoid borrowing from the dealer directly as they think they will be more expensive, but there are times when it is worth considering doing this.

Some dealers will offer 0% finance. This means that you will be able to pay for the car slowly, over a few years perhaps, but you will not have to pay interest in order to do this. This can seem really good, but it is worth checking a few things first. Find out what the arrangement fees are for the loan, as there may be extra charges which could still make this an expensive way to borrow the money. It is also worth noting that if they can afford to offer this deal it may mean that they have increased the prices of their vehicles to cover the finance costs and risks. This means that the specific dealer may actually be more expensive, for all buyers than others. Although you will not be able to compare prices exactly as cars are not identical, you should be able to look at their prices for certain types, ages and models of car and see how that compares to other dealers and work out whether you think they are too expensive. Consider whether it might be better to go to a dealer that does not offer this finance deal, pay less for your car and get a loan elsewhere to pay for it. You will need to research the costs of borrowing from alternative places in order to work this out though.

It may be easier to secure a loan with a dealer. They will want you to buy the car form them and so they may not have strict criteria as other lenders. You may find that even if your credit score is not that high, you may be more able to get a loan from them, than another lender. This will of course depend on the specific dealer and what guidelines they use to determine who to lend to.

If your alternative for borrowing is really expensive then it will make sense to borrow from the dealer. If you have to turn to a credit card or overdraft to get the money, then it is likely that you will be paying a lot more back in fees, charges and interest with these than you would for a loan. It is worth comparing the rates though, just to check whether this actually is the case or not.

If you are in a hurry to get a new car, perhaps yours has just stopped working and you need a new one to travel to work, then you will need to get it immediately. Organising finance from anywhere but the dealer could take so long that you may find you cannot get the vehicle in time, if you wait. It is not nice being rushed into a decision like this, not only a quick car purchase but also a quick loan, but if you are desperate then you may have to. However, even if this happens it may be possible to pay the loan off early to save yourself a bit of money. Work out how much this will cost as there are likely to be fees in order to go ahead with this. Compare the costs of keeping the loan form the dealer, including early repayment fees with the costs of using a different loan to pay it off and decide whether you think it is worth doing or not.

Borrowing money is always a decision that should be thought about for a long time. You need to consider whether what you are buying is worth the cost of the borrowing as well as whether you think you will be able to make all of the repayments on time. Then you need to make sure that you borrow money the cheapest way possible. It is a lot to consider and it can become confusing and it can be easy to be talked into an unfavourable deal. If you find it all a bit too difficult then ask a financial advisor to help you. They will be able to look at all of the available options and show you which is the cheapest so that you can more easily decide which is going to be the best one for you. Although you will have to pay them for their help, it can be very much better than signing up to the wring loan and paying massively over the odds for it, far more than the cost of the financial advisor.

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