5 common mistakes people make when financing their car
If you’re considering financing your next car, we know just how confusing it all can be. There are lots of different finance options (be they products or features), complex terminology and various people with options and competing priorities. Before taking the next step, we thought it beneficial to explain some of the more common mistakes people make on their financing journey to help you feel more comfortable and confident when you finance your next car.
Car financing mistakes to avoid
- Not understanding and recognising ‘pricing levers’ being pulled
The reality is when you are financing a car, it’s not just the interest rate that is variable. These ‘pricing levers’ include things like offering very low interest rates while offsetting that with a higher purchase price of the car, or increasing or decreasing your old car’s trade-in value to maximise the business’ return. Another more recent lever being added into the mix is a product feature called Guaranteed Future Value, which provides you assuring on the value of your trade in at the time of purchase so long as you comply with the terms and conditions.
- Not realising you have options
You may not realise this, but there are a number of different product options available to you when you finance your car, some of which can save you money. The way your car will also have an impact on what type of finance you are eligible for such as a consumer loan, a commercial loan or a novated lease. Furthermore, many products have different features such as early termination options and residuals which make things even more complex! To familiarise yourself with all of the options available to you using a specialist automotive finance broker can often be your best option.
- Not fully understanding fees and charges
Fees and charges you haven’t been made aware of or just don’t really understand can add up and cause real headaches in the future. Many finance products have upfront fees, ongoing management fees and exit fees. Unless you have a finance professional walk you through these, you better make sure you read all the fine print twice!
- Not asking the right questions
If you don’t know what to ask, you might not be getting all the information you need to make the right decision. Research and write down any questions you’d like to ask the finance broker or financier – a good one will happily provide you with clear, simple answers. Key questions to ask may include:
- What product options are available based on the way I intend to use my car?
- Are there early exit fees if I decide to sell my car before the end of term?
- What insurance and warranty products are available to protect my car?
5. Not shopping around
Sure, you may have been with your bank for years, but that doesn’t mean they’ll give you the best deal. It pays to shop around before you sign and you may save time and money by speaking with a car finance broker – they have access to a network of financiers and can do all the work for you!