Before you take out finance at the dealership, ask yourself these questions…

Women with CentsBlog, Budgeting, Debt

Shopping for a new car is an experience – and boy is it a fun one. Choosing colours and interiors, taking test drives, that new car smell, imagining where you’ll put your bag, sunglasses and keys when it’s your very own car…

It’s easy to see why so many people take up car finance from the dealership, on the spot.

But is car finance from a dealership a good idea? Could you get a better deal elsewhere? What else should you be asking? I thought I’d share my answers with you before you find yourself in the dealership. 

Are the low interest rates that dealership’s offer on finance too good to be true?

They can be. Where you’re being offered a really low interest rate, there is a good chance that the dealership has inflated the cost of the car to get that money back. So don’t give it away up front that you’re looking for finance before you negotiate the price. To make it easier to compare car dealership fiance against a bank loan, make sure you add up your total repayments including any admin and set up fees. This will give you a better idea of the true cost of the dealer finance. 

Could I get a better loan elsewhere? 

It’s just as important to get a good price on your loan as it is to get a good price on your car. So just as you might visit a couple of dealerships before you make your purchase, check out a few loans as well (comparison websites such as Mozo, Finder, Canstar and RateCity can give you a good idea of what’s available in the market). There are lenders, banks and dealerships that offer these types of loans, and many providers will give you “in principle” approval for a particular amount so you’ll know your budget ahead of time (and you can stick to it!)

What’s the difference between a loan and a lease?

When you take out a loan for a car and you pay it off, you own the car and can do what you like with it. But with a lease you “rent” the car for an agreed period of time (making regular rental payments) and at the end of that period, you must return it. If you want to keep the car, you may have the option to buy it at the end of your lease, but you’ll usually have to come up with a lump sum to do it. Check out our Leasing Calculator and be sure to talk to your accountant or financial adviser if you are thinking of salary sacrificing the car repayments or claiming them on tax as different rules do apply.

If I decide to go ahead with finance from a dealership, what should I know? 

Be careful of add-ons – things like extra insurance, or extra warranty can often be thrown in with the loan. Think about whether you need each add-on – you don’t have to take them up if you don’t want to. If you do think they’re important then shop around, you’ll probably be able to get a better deal elsewhere. And don’t be afraid to ask lots of questions. You might feel pressured to make a quick decision, but get all the facts before you sign on the dotted line.

If you’ve bought a car recently and have some more tips for our community, post them to the Women with Cents Facebook group.

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The information provided by Women with Cents is general in nature. It doesn’t take into account your objectives, personal financial situation or needs. Think of it as educational material in which to help you make more-informed decisions. We recommend you obtain financial, tax and credit advice specific to your situation before making any investments or financial decisions.

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