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Home / NICU Blog / Car Yard Finance - if its too good to be true

Car Yard Finance...if it's too good to be true

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And there are few places this rings truer than in the finance office of your local car dealer.

Dealers have taken to advertising unbelievably low rates for finance : 2%, 1%, or even 0% interest. A low interest rate might sound like the most important number related to buying a car, but it’s not the only number…

Don’t be drawn in by a special finance deal only to find that it’s not on the model you were after. Special finance deals may only apply to a fixed price of a vehicle, so you can’t negotiate the price down. It may only be for no trade deals. It may only apply to a very specific model. So be careful.

Do your homework

Find out everything you need to know about the car you want before you even begin to think about walking into a dealer – is it worth your money?

Shop around various dealers to see who’s offering the best deal. And focus on only buying the car, and ignore any of the so-called “value-adding” products they might try to tack on to it, like tinting, warranties, or any sort of paint protection. These are products that buyers aren’t familiar with, and so don’t know the true value of, and so can be sold with the car at an inflated price.

Arrange your finance first

Again, before you even think about heading to a dealer, get your finance pre-approved. Knowing how much you’ve got to spend (and setting this limit before you can get dazzled by a salesperson and the showroom!) is a great way to prevent you getting in over your head.

Fixing your finance before looking at used cars is even more important as these loans are notorious for being sold at very high interest rates and long terms. Do the math to ensure your total repayments with interest don’t outweigh what the car is really worth to you.

But, most importantly, a loan from a neutral third-party like Northern Inland, and not the person selling you the car, means you’re not bound to take the car on their terms, and their terms only. Letting the seller set both the price and how you pay that price gives them far too much power over your purchase.

Did you know that many of the friendly dealership staff who arrange car finance are on commission? Keep this in mind when you are being sold the finance in the car yard. It’s very much in the interests of the dealership and sales person to sell you the finance.

One of the biggest traps with dealership finance is that many are a fixed rate product, which means that break costs and early termination fees may apply. So it’s crazy that potential car buyers can spend weeks or months searching for the ideal car, but then for the most important part of buying a car, sign a finance contract they have looked at for 5 minutes, committing them to many years of repayments without understanding what they are getting themselves in for. The sour taste of a bad finance deal can remain many years after excitement of a new car has worn off. The same goes for insurance, so get a quote from a third party like Northern Inland as well.

Your own loan lets you negotiate

From the dealer’s perspective, there’s no difference between a customer who walks in with a briefcase full of cash to pay for the car, and one who walks in with a pre-approved loan (except figuring out what to do with the briefcase after). Unlike with dealer finance, your ability to pay isn’t now defined by the dealer.

So, start haggling, not just on the car’s sticker price, but on any other costs: pre-delivery costs are one of the biggest dealership lurks.

Securing your own finance is one of the best buying tools you have when it comes to buying a car. From a practical point of view, a pre-approved loan, like a Smart Personal Loan from Northern Inland, is as good as cash to a dealer, and just as powerful when it comes to negotiating a better deal for yourself.

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