Can you get your dream car on a limited budget? Let’s put it this way: The odds are stacked against you. Finding car finance deals is hard for anyone these days. If your credit rating is bad, it’s even harder. With this in mind, getting a loan that will buy you a perfect vehicle seems like an impossible mission.
But, as wise men (and women) love to remind us: Never say never! The market for car finance has diversified considerably over the past few years. This has opened up entirely new possibilities for thousands of low-income drivers. In addition, the used car market has expanded and competition has increased. If you intend to buy used cars, your chances of finding a great car at a great price are better than ever before.
To secure an excellent car finance deal, however, you’ll need to come up with a strategy. In this article, we’ll help you devise one.
We’ll show you which deals to steer clear of, which to embrace and how to prepare yourself. If you take the right decision – and if you’re lucky – you could really be driving away with your dream car soon.
Car finance deals: Some cautionary words
For most of us, a great car finance deal will forever remain a dream. One thing’s for sure: There are no shortcuts to achieving it. You either set up a sound plan and implement it – or you’ll have to dream of something else.
Before we can even begin to analyse some of the concrete car finance deals out there, we first need to warn you against some common misconceptions. Your can take all the right decisions, after all – but if they’re based on a shaky foundation, they won’t help you reach your goal.
Avoid „special car finance deals“
It doesn’t matter when you visit a car dealer. They’ll always have an ‘incredible offer’ of some sort. These will all sound great at first. But you should usually be able to get a much better deal by just sticking with your strategy and making the most of it.
Website Mozo, aka ‘The Money Saving Zone’, has a great example.
Imagine, they encourage you, a situation where the dealer offers you a car plus free service for 5 years (or up to 120,000 miles).
This sure sounds like a fantastic car finance deal. But is it really? According to Mozo:
“Wouldn’t you rather negotiate $5000 off the sale price and take your car to get serviced at an independent mechanic for $200?”
Good point. The idea here is that a dealer would never offer you a special deal out of the kindness of her heart. Some car finance deal offers are obviously better than others. But never accept one without looking at your alternatives first.
Keeping things flexible
Just as with mortages, car loans come in two varieties: As a fixed and flexible rate. With a fixed rate, your costs stay the same throughout the entire length of the repayment period. With a flexible rate car loan, you agree on a rate for a certain time frame, say three years. After it has elapsed, the percentage rate is then adjusted to reflect the current interest rate level.
Flexible rates can be extremely alluring. With interest rates low, you can get incredible deals. Monthly payments will be easy to meet. And if you’re lucky, interest rates will stay where they are and you can pay off your car at a very attractive price.
If, however, you’re not that lucky, you could suddenly see your monthly costs soar. You wouldn’t be the first to default on their loan after a steep hike in interest rates and you won’t be the last.
But there’s no need to take the risk. Just insist on a fixed rate loan instead. It may be slightly more expensive in some cases – but it’s by far the better and safer deal in general.
Stick with the plan
Every sales person want to sell you as much as possible. But there’s one thing they enjoy even more than selling you a lot: Selling you a lot of stuff you don’t need. The reasoning is simple: The more unnecessary things you buy, the higher the chances you’ll come back for even more stuff you do actually need.
The greatest achievement of all, however, is selling you nothing for something. After all, nothing won’t cost the dealership a thing and maximises its profits. Don’t be fooled into believing this is a rare occurrence. In fact, it happens all the time.
What you don’t need
In a shocking youtube video, consumer advice guru Kevin Hunter has described these tacts in detail. He mentions a host of supposedly vital insurances and products which hardly amount to anything under closer inspection.
The following are just a few of the things you definitely do not need:
- Rust proofing (not required and may actually void the warranty)
- Fabric protection (nothing more than an “off the shelf spraycan applied by a minimum wage employee sold to you for $200 or more.”)
- Paint protection (not required with modern paints)
- GAP insurance (except for select cases)
Hunter also advises to double check all the numbers before signing the contract. It wouldn’t be the first time that the ‘finance man’ changes them around again in the final stages of the process.
Long term versus short term loans
Very few buyers realise how much influence they have on the cost of a car loan. The only thing you need to do is choose a wise combination of interest rate, loan duration and monthly payments.
Generally speaking, the following applies:
- The higher your down payment, the cheaper the loan.
- The quicker you pay off the loan, the cheaper the loan.
- The quicker you pay off your loan, the higher the monthly payment.
If you can afford it, it therefore makes sense to opt for a sizable down payment and then to pay off the loan as quickly as possible. However, if your resources are limited, it may be wiser to go for a longer loan with smaller monthly payments. It may be more expensive, but it can also save you from defaulting.
To find the best combination, use our easy online car finance calculator.
As we mentioned, when it comes to car finance deals, setting up a solid strategy is one of the most vital pieces of the puzzle. Don’t improvise. Every step of the way should be premeditated. And once you’ve made up your mind, don’t get caught up in the heat of the moment and change everything around.
There are a few things which are essential to your preparation. We’ve compiled four of the most important ones for you below. Some of these steps will require some time. But rest assured, this is time well spent.
Back in the days, people would get their pricing information from weekly magazines which were as sexy as the phone book and weighed as much as a brick. The publications which survived have now entered the Internet. This has made looking up prices for a particular model very easy indeed.
As a result, you never need to set foot in a dealership again without a very lucid picture of what the car you’re looking for is worth. Of course, this ideal price will always remain a rough indication only. Prices are subject to considerable regional variations, for example. And then there’s a huge difference between what a car can fetch on the private market and how much it will cost with a dealer.
The great thing is that websites like Parkers allow you to compare the prices of different trim levels. These define the various editions of a model, from the most basic version to the more advanced ones. You can also check the fluctuations in price for different generations of the same trim model. They can be considerable!
What do you really need?
This seems a bit like a trivial thing to say, but you should really take the time to find out what kind of car you need.
One of the most common reasons for people not finding a suitable car finance deal is that they have unrealistic expectations. If you’re on a tight leash, the term ‘dream car’ shouldn’t even be part of your vocabulary. And getting a coupe if you have two kids obviously seems like an bad idea, too.
Here are a few of the things you should think about when making your choice:
- Used or new? Car finance deals for new cars tend to look more attractive. But in the end, used cars are always cheaper. If you feel strongly about getting something as good as new, at least look for a 1-3 year old model to save on depreciation.
- SUV or hatchback? SUVs have taken the car market in a storm. They’re everywhere now and some manufacturers, like Ford, have even decided to only produce SUVs from now on! However, SUVs are more expensive to buy and to maintain. Hatchbacks, on the other hand, are probably somewhat under priced right now. This gives you a unique opportunity to get a great finance deal.
- Big or small? Especially if you have kids, it seems like a natural choice to get a big, family-friendly vehicle. However, think about how often there will actually be four people driving in the car at the same time. If you only need transportation to take you to your holiday destination, you can still rent a car for a few days at a more than reasonable price these days.
When to buy. When not to buy.
We did say that you could get a car finance deal every time you walk into a dealership. The only problem was telling the good ones apart from the bad ones.
Here’s a useful hint how to do that: Take a look at the calendar!
Cars tend to be most expensive ahead of the holiday season. Especially in the Summer, prices soar as happy and relaxed customers are looking for the car that will take them to their favourite vacation spot.
Vice versa, you can get seriously great deals at the end of each quarter and, best of all, the end of the year. This is because dealers will want to improve their bonuses and move out old stock around this time. Unless you urgently need a car now, time your visit at the dealership accordingly.
Another useful thing is to consider buying a car towards the end of a model cycle. Just before a new generation of a car hits the shops, dealers are eager to get the old stuff out of the way. This is the perfect moment to lay your hands on higher trim levels or simply a car you could otherwise not afford.
Car finance deals: Examining the different options
In the following section, we’ll take a closer look at all the different options you have to get a supposedly great deal. Some of them are obviously better than others, so stay alert and don’t take any rash decisions. By familiarising yourself with these possibilities, you’ll know about their specific pros and cons before entering into negotiations.
0% car finance deals have been around for a long time. We’ll take this as a good sign. It does hint at the fact that they work for at least some buyers. Certainly, they are not a scam and can be very attractive.
What you need to realise is that these offers are only valid for a strictly selected clientele and for a limited amount of time.
- If your credit rating is not picture perfect, you won’t be eligible.
- If you can’t meet every single condition, you’re not eligible.
- And even if you do meet these criteria, the 0% rate only applies for half a year or a year at best. After that, the contract switches to a more traditional rate.
If the deal is already great, then you can take a 0% deal as a gift on top. But don’t ever base you entire decision on it.
Pre reg cars
Preregistered cars are frequently mentioned when it comes to great car finance deals. These are vehicles which have been registered by the dealership for the sole purpose of meeting sales targets. As Money Saving Expert explain:
“The way it works is that the dealer ‘buys’ the car, and registers it to the dealership. This is often done to artificially meet sales targets for the month or quarter. Dealers do this as they can often make more from bonuses for hitting targets than they can from selling you a car. But, what it means for you is that you can buy a new car for a hefty discount, because its records will show it’s already had one owner. It’s all the benefits of a new car at a nearly new price.”
This is indeed a great opportunity, if you can find it. We wouldn’t however, get our hopes up too high if we were you. Because these cars can be extremely cheap, it’s almost always a take it or leave it offer.
There will usually be no haggling about either the price or the conditions. Most importantly, the financing will not be very attractive. You may even have to pay the entire sum upfront. Don’t expect this to be easy if your strapped for cash.
Very few people like to haggle. But, according to some sources, haggling for better car finance deals usually yields results for those that do. Approximately 60% of hagglers managed to shave something of the total cost of their purchase. The odds could be far worse!
However, you need to understand one essential thing about haggling. As the Washington Post has outlined, most car dealers these days don’t make their money on cars. They make their money either on repairs or financing. What this means is that, in terms of the actual car finance deal, there will almost be 0 room for haggling.
If you really want to give things a shot, instead focus on things the dealer could more easily throw in: An extra or two or a reduction in the purchase price. Whether or not this is actually possible significantly depends on your credit score and on how high you can make the down payment.
All in all, you can find great car finance deal with the right strategy. At CCC, we’re more than happy to assist you. We’ve helped thousands of happy customers get behind the wheel again. Don’t hesitate to contact us. Either visit us at our Manchester showroom – or use our easy online application form.