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Financing your next Vehicle or Motorhome
An Important Decision
A car – whether new or used – is often the second most expensive purchase you'll ever make in your life, next to your home. Because of this, it is important for you to explore and understand the variety of vehicle financing options available. Only then will you be able to identify and decide which best suits you before making a final commitment.
There are a number of ways of obtaining finance for a vehicle including:
- Vehicle manufacturer's insurance
- Independent finance companies
- High street banks
- Building societies
- Other direct lenders
- Online finance specialists
In weighing up the pros and cons for each of these options, it is also important to consider things such as the terms offered (eg. the amount of credit given, amount of monthly payment, number of monthly repayment instalments, APR, etc.)
Opting for dealer finance means:
- The vehicle will be checked to make sure there is no outstanding finance or that it hasn't been written off in an accident.
- Finance is secured against the vehicle so it may be easier to get approval.
- Because the finance company own the vehicle and has paid money directly to the retailer, the finance company can assist in handling merchantable quality disputes.
- Your dealer can arrange a finance package for you there and then so you can drive the vehicle away at point of sale.
- The vehicle can be used immediately whilst allowing repayments to be staggered, giving you a better cash flow.
- Agreements are easily negotiated and available.
- Motor finance loans are not repayable on demand unless you default on the agreement or if the vehicle is written off and there is a shortfall liability.
- If eligible, you can take out GAP and CPI Insurance with the agreement to protect your ability to repay the loan should you fall ill, have an accident, lose your job, write the car off etc.
- Interest is fixed so you have a fixed monthly payment.
Other Finance Options:
- Can attract a fee for card transactions
- The limit on your credit card may not be enough to purchase the car you choose
- Lots of companies offer 0% for the first 6 months but the rates after this time can be high
- If you don't clear the balance interest charges can be high
- Can be arranged through banks and building societies and are separate from the vehicle
- Rates can be attractive for certain customers but they are based on individual circumstances such as term and customer credit history
- Loans may be secured against your home
Keep In Mind
- Establish your budget – not just the sales price you are willing to pay, but also what you will pay over the entire agreement including the deposit, interest costs incurred (made up of APR) and other monthly/annual charges such as road tax, insurance etc. Compare apples with apples when looking at your repayment rate, i.e. the Annual Percentage Rate - APR is a measurement that allows you to compare different finance options offered by lenders, taking into account the closing fees of the finance companies and giving you the total cost over the period of the loan.
- Read the small print – make sure you know and understand what you are signing up to.
- If it is a second hand vehicle, make sure it has all its service records and that they are up to date - beware of such common defects as hidden write-off damage and outstanding finance. If you're not using dealer finance, get the RAC or AA to check the vehicle before buying.
- Keep in mind that it is illegal to drive without insurance and up to date tax disc – both must be bought immediately if not offered as part of the deal.
- Talk to Cherrytree – they will have years of experience and can tailor finance to meet your individual needs and circumstances.