If you are looking to buy a new car and need to borrow the money to do so then you may be wondering where to go for a loan. Many people will choose the loan form the dealer, but there are other options and it is worth thinking about them before making the decision. It could save you a great deal of money.
Loan from dealer
If you get the loan form the dealer then it could be more convenient. They will organise it with you when you are sorting all the paperwork to buy the car. This means that you will not have to contact more than one company. They may also offer you a discount if you take the loan with them and some even offer interest free credit on their loans.
However, sometimes loans from dealers can be more expensive. Make sure that you calculate exactly how much you will be expecting to repay and compare that with other options. Ensure you look at the interest and the set-up costs. These can be hidden unless you compare the AER’s and so you may think you are getting a better deal than you actually are.
Loan from bank
You may be able to get a car loan form a bank or take out a personal loan and use it to pay for the car. This could possibly be cheaper than a loan from the car dealers and so it is well worth considering one. It is good to do some research to find out what the loans cost. Do remember that when you are comparing loans it is important to think about other factors as well as the price. For example, make sure that you are aware of how many repayments there will be and how much each will cost. This will allow you to calculate whether you can afford those repayments. It is also good to think about the lender and what their reputation is like, whether you trust them and what their reviews are like. This should be true of the car dealer as well as the bank. Car dealers will tend to use a finance company so try to find out more about who they use and do some research on that company as well. Although you will buy it through the car dealer, any interactions you have afterwards will be with the finance company not the dealer.
Save up instead
All car loans will be costly. You will be charged interest and there may be other charges as well. It is good to find out how much extra it will cost you and think about whether you feel that the car will still give you good value for money considering the extra money that you will have to pay for it. It is worth also considering whether you really need the car now or if you can wait and save up for it.
If you do not borrow money to pay for the car then you will pay a lot less for it. It is therefore well worth considering this option. Of course, you will need to wait and you may need a vehicle now and so this may not be possible. However, if you have a car that works, then saving up could be a good option. If you put aside the amount of money that you would need to pay towards a loan and pay it into a savings account then you will be able to save up for the car in less time than it would take you to repay the loan. This is because you will not only not have to save up the interest but you will be getting interest on the savings which, if you leave in the account, will also add to the amount that you have saved up.
These are just a few options to consider. It is worth thinking about them before you decide what to do. It can be easy to be tempted to get a loan from the dealer as it is easy and convenient and means that you will get the car more quickly. It may not be the best financial option though and so you need to think about the consequences of this. It can be hard to decide not to get the car right away and to delay, either to investigate alternative loans or to save up but it can be really worthwhile. Take some time to think about it and discuss it with others as they will be less emotionally attached to the new car than you will. It is worth it as you may even find that if you delay a better car comes along and you are glad that you waited as you can get even better value for money from this one.