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Posted on 2017-12-08

Get the finance rate you deserve

Buying a new car is often the second biggest purchase we make, second to buying a home. There are many ways to finance a new car, and you can probably guess the most popular options are to finance with the dealership or to take out a secured car loan with a broker or a lender.

What to look out for if you’re offered dealer finance:

Dealer finance can be tricky and you must be careful not to limit your new car purchase decision by getting sucked into shiny low rate finance options advertised by dealerships. Low rate dealer finance offers are usually backed by manufacturing brands who are promoting a specific model. Many low rates are only available during the start up period of the loan.

Some dealer finance options require an upfront payment, or balloon payment in the end. This strategy reduces the monthly interest rate, but does not make a difference to the final loan amount. In other words, you may not actually end up making any of the savings you originally perceived by the advertised low rate.

You are also limited in having the ability to compare and consider multiple options if you opt for dealer finance, this could mean you miss out on a product that may suit you better.

Why a secured car loan may be a better option:

Many lenders, if not most, offer secured car loan products of varying shapes and sizes. Depending on how much you want to borrow, your assets and liabilities, and the health of your credit file, with a secured car loan you have the scope to compare different products with both variable and fixed rates.

A secured loan give you the flexibility to purchase any new make or model. Or even a used car if the maximum car age meets lender requirements (up to 7 years generally).

If you’re still unsure:

Get pre-approved. To keep your options open, and to know exactly how much you can borrow – get a pre-approval for a car loan. Many lenders have pre-approval services and the application process is similar to the process of applying for an actual loan. You need to supply documents, prove income and have an idea of how much you want to borrow. Pre-approval is conditional, it’s not a guarantee of a loan and your pre-approved amount will expire.

If you can get it, however, pre-approval gives you more confidence and control to buy exactly the car you want, and bargaining power as you know what you can afford and borrow.

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