Common Car Financing Mistakes to Avoid

Under the bright lights of a showroom, it’s easy to get caught up in the excitement of finally purchasing the car of your dreams. While dealer finance may seem convenient, it can often come with higher fees and make negotiating the car price more challenging.

If you secure a loan before visiting the dealership, you’ll likely have more leverage when it comes to negotiating a better price. While many buyers opt for dealer finance for convenience, they may not realise that the low interest rates offered are often offset by hidden fees.

With a bit of research and speaking to your broker, you can often find better terms that suit your needs. Many lenders offer flexible terms ranging from six months to five years and can approve loans within 24 hours.

Here are some tips to help you secure the best financing if you are looking to purchase a new car:

  1. Prepare your paperwork beforehand
    Enter the showroom with your pre-approved loan. Salespeople will be more eager to offer a better deal to secure the sale when they know you are ready to buy.

  2. Beware of “Special Offers”
    Watch out for deals that offer free service for five years or 100,000km. The warranty on the car will only be available while it’s serviced with the dealer. So, rather than tie yourself into that costly arrangement, use your pre-approved loan to negotiate a discount instead.

  3. Avoid variable rates
    A fixed rate is usually the smart move for a car loan. Your repayments will be predictable, which is helpful if you wish to apply for a mortgage or seek a larger home loan in the short to medium term.

  4. Accelerate payments
    Some car loans lock you into set payment terms, preventing you from saving on interest by paying off the loan early. If flexibility is important to you, discuss with your broker to find a more flexible arrangement.

  5. Watch out for hidden fees
    Dealer finance often includes built-in fees that can make a low interest rate less attractive. By working with a finance broker, you will know exactly what you’re paying for and can ensure you’re getting a good deal.

With the right preparation and advice, you can secure both the car you want and a financing deal that best suits you. Contact our highly experienced team at SCM Finance today to secure the best car financing option for you.

Steven Papanastasiou – Principal, SCM Finance Solutions

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