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Know Your Auto Loan Options and Save Thousands
Until relatively recently your choices for obtaining an auto loan or auto finance were limited. You could take out a personal bank loan or you could take out whatever finance the dealer would offer - usually hire purchase. As there was so little choice in types of finance there was relatively little competition and charges and interest rates could be very high.
Nowadays things are different. There are thousands of lenders and dozens of innovative finance packages for your auto purchase. You can get finance from almost anywhere on the high street and there is strong competition for your business between the banks and credit brokers. You can now shop around for the best auto finance deal and haggle on terms until you get the best value for your money.
Dealers also know that financing has become a major factor in most people’s auto buying decisions. If a customer doesn’t like the finance available from one dealer she is quite likely to walk out and buy that new car with a dealer who can offer a better finance package. With 2 or more offers of finance customers are in a great negotiating position. Consequently, auto financing is becoming ever more competitive.
Another well established trend is for the major auto manufacturers to offer very strong finance deals. Manufacturers will also often create auto finance bundles that might contain insurance and a number of years maintenance or extended warrantries. Some even offer free fuel for your first 12 months of motoring. While there can be some great offers from auto manufacturers the mass of extras they often include can make it difficult to see just how good the deal is for you.
A further set of options that are becoming much more popular are lease plans. Once the preserve of the company car driver auto lease plans are becoming ever more diverse and cater more and more for private owners. Look for a personal lease plan.
Lease plans have 2 great advantages: firstly, they keep the cost of the upfront payment low; secondly, they keey your monthly payments low. But you don’t get anything for nothing in the finance World. Lease companies can only keep the upfront and ongoing fees low by retaining ownership of the vehicle. At the end of the lease term you usually have an option to purchase the vehicle at a price agreed at the onset of the contract. Alternatively, you can trade in the vehicle for another - any difference between the agreed value of the old car and it’s actual market value can be used as deposit against your next vehicle.
Lease plans seem to appeal to people who like to be seen in the newest auto models, who never want to own the vehicle and who don’t care that they will be paying a set fee for that privilege every month for ever.
In general the cost of finance in a lease agreement compare pretty well with other sources of finance. Where they can get expensive is if you exceed the mileage limits in your contract. Payments for excess miles can be pretty high.
Another trend, and one which should be treated with caution, is to raise money by refinancing your home. The chances are you will obtain a good interest rate - probably better than for any other sort of loan. But what the advocates of home loan refinancing always seem to forget to tell you is that the amount of your auto loan is added to the total outstanding capital. You will continue making payments against that amount for the whole of the life of your mortgage.
If you then want to get a new auto after 3 years or so do you add to the outstanding capital again.
As you can see, the range of finance options for your next auto purchase is pretty big. Your biggest challenge is finding the loan that best meets your needs.
