Tuesday 26 September 2017

Take time to find the best deal or you'll pay the price

Once you have sealed the cheapest deal, enjoy your new car.
Once you have sealed the cheapest deal, enjoy your new car.
Geraldine Herbert

Geraldine Herbert

Nearly half of new car buyers will seal the deal within 30 minutes of setting foot inside the showroom, according to a recent survey.

But buying a car is a two- stage process, so it's worth thinking about how you'll fund the purchase before you start shortlisting vehicles - otherwise, you can find yourself lumbered with an expensive loan.

There are a range of options, including personal loans, hire purchase (HP) and personal contract purchase (PCP) to choose from. Borrowing from a bank, building society or credit union gives you eventual ownership of a car. The best way to compare loans is on APR - the annual percentage rate - as this allows you to work out how much a loan will cost you over its lifetime.

Though bank loans can appear expensive when compared to other forms of finance, they do allow the flexibility of purchasing with cash and offer a greater range of repayment periods, usually ranging from six months to five years. They also extend the choice to all car dealers, not just those offering PCP deals, and to used cars.

However, banks typically limit the amount of money you can borrow for a car loan, so bear this in mind if considering this option.

Hire purchase is the simplest form of finance outside of a personal loan. With HP you pay a deposit upfront (often 10pc) and pay the rest in monthly instalments over an agreed period.

Remember, you do not own the asset until the final payment is made. Two years down the line and €15,000 later, if you can't keep up the payments, you stand to lose both the car and all the money you have spent thus far on it.

A PCP has lower monthly repayments, because you are not paying off the full value of the car and as a result it is a more affordable way to get into a new car.

Interest rates depend on make and model. The contract is typically structured so you pay a deposit and monthly instalments over a fixed term and at the end of the agreement you have the option of returning the keys, buying the car outright or negotiating another PCP.

Other sources of finance include credit unions. Credit unions have become a popular option over the last few years, as there are no completion fees and no balloon payments.

But for those rejected by regular borrowing sources, alternative providers do operate in the market and claim that by speaking directly with loan applicants they can determine what a customer is realistically able to borrow and establish the real reasons behind any situations which may be affecting a credit rating.

Such companies provide HP and leasing options -but interest rates are higher than other forms of finance.

Finally, it is important to make yourself aware of any fees that may be incurred -don't let interest rates be the only deciding factor.

When it comes to buying, always negotiate the total cost rather than a monthly repayment.

Often monthly or weekly repayments can conceal an expensive deal.

Also, you'll need to consider running costs, insurance cover, warranties and breakdown cover - so don't overstretch yourself.

Once you have sealed the cheapest deal, enjoy your new car.

Sunday Independent

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