Vehicle Financing

With the cost of new vehicles steadily increasing, purchasing a vehicle is likely to be the second biggest financial decision, outside of purchasing property, that you’re likely to make. And, like with all financial purchases that involve loans, interest rates and other fees, it can be much more expensive than it need be for the unsuspecting. So in order to help you make the right choices, and to keep the cost of financing your vehicle purchase as low as possible, here is a basic primer on vehicle financing…

Before you even start the test driving…

There are two distinct ways of purchasing a vehicle, from a broad perspective. Either you know the budget that you can afford, and go looking for vehicles in that price range, or, you know the make and model of the car you want (and therefore the price range), and go looking for the best deal you can get. No matter which route you take, you need to be absolutely sure in your mind what your budget is, and how much you can afford to pay each month, and you need to be resolute in sticking to that budget.

Get a copy of your credit report, so that you know beforehand what is on it and what the lender is likely to see. You can avoid any unnecessary embarrassment and dashed hopes by taking the time to see how your credit stacks up. To find out where to get your credit report, click here .

Determine what your possible sources of finance will be. Will you be financing in-house with the car dealer? Through a bank? Through a different money lender? No matter which route you choose, make sure you shop around and get the best APR deal you can.

If you’re going to be borrowing money, take the time to learn the terminology so that you are less likely to be intimidated by any sales pitch. Small variations in fees and interest rates can have an extremely detrimental impact on the amount of money you pay in the long term. And remember, a vehicle is generally a depreciating asset, meaning it loses value as time goes by. When you borrow money to finance a vehicle you’re paying extra to buy a depreciating asset – and that’s the worst thing you can do with your money, so at least make sure you get the best deal possible.