Why it pays to check rates and details of finance deals
Don't take first offer, says Motoring Editor Eddie Cunningham
The two most important items in a finance deal are that, firstly, you feel you've got the best terms you possibly can and, secondly, you fully understand what's involved.
1. Don't just take a PCP at 5pc or a bank loan at 8pc because that's what you're told is the going rate.
Push a little. What have you got to lose? If they say no, you can settle for their original terms or go check somewhere else.
I'm surprised at how quickly people accept the first figure they are quoted.
We should bargain and question a lot more. There is money to be saved.
I know buying a car is an exciting time in a family's life and the figures can seem so reasonable. They can be. But why not try to get even more reasonable ones?
Now is as good a time as there has been for years to get on the bargain trail because it is a cut-throat market out there for those selling cars and finance.
So test their mettle. Are they willing to let you go to a rival because you feel your credit/customer standing merits a better rate? No harm in asking, is there?
From PCPs to credit unions to banks, there is money - and plenty of it - available for prospective car buyers. Just make sure you battle hard to get the best rate going.
2. Understanding your deal is vital. PCPs can be great - for some.
Let's be blunt about it. They've put people in new cars who would have struggled to do so otherwise.
But they are not for everyone and never lose sight of the fact you don't own the car (unless you decide to buy it outright for its guaranteed minimum value) in the course, or end, of its term.
I've been accused of being anti-PCP. I'm not. I'm just urging caution that you understand every implication. Especially make sure you are happy with how much equity you can expect to carry over to your next deal. Equity is NOT the guaranteed minimum value. It is whatever the market is paying over and above that sum. It might be a small amount when the day comes to renew, or it could be your next deposit. Just understand: equity will vary with each deal, car and market.
Used imports, for example, have knocked 15pc on top of normal depreciation off the value of all secondhand cars. That could mean having to come up with more cash to start another PCP.
Just be aware of the downsides of all finance deals. Don't rush. Ask questions. Do your sums.