Reducing the cost of the finance you pay for your car is the most effective way to keep the cost of running a vehicle as low as possible. If you follow through on all of the suggestions below, you can save hundreds, in some cases, thousands.
Believe in your ability to reduce your monthly car payments
Everything we suggest below is simple to implement, but you will need to invest a bit of time. It is important to have the right mindset. If you are sitting across from a dealer asking for a discount believing that you are not likely to get one, the chances are they will say no to you. On the other hand, if you know it is possible you will ask with conviction and be far more likely to secure that discount.
Do a bit of research
Knowing what you are talking about will help you to be more confident and recognize a good deal when you see one. So, put aside a few hours to go online and do a bit of research. You will want to understand how each type of finance works and the pros and cons of each of those options.
Shop around for the best finance deal
Car finance calculators make it easy to identify roughly how much you should pay. Knowing this in advance means you are less likely to inadvertently end up signing a bad deal.
Taking the time to shop around and compare deals takes time but is always worth doing. When you do this, get the total figure you will pay back for each potential package. Using that you will be able to see which one will save you the most.
Never assume that because the interest rate is lower that the cost of the loan will automatically be less. Differences in fees can easily wipe out any interest-related savings.
Factor in the cost of fees
Make sure that you fully understand what all of the costs will be. Most dealers and some car finance firms charge a setup fee. Ask how much this is and see if you can negotiate a discount.
Read the small print
Before you sign the contract, read it to make sure that everything that has been agreed has been included. In particular, any discounts and make sure no extra charges have been written into the contract.
Choose the shortest term possible
The longer you borrow money for the more interest you will pay. Opting for a 2 or 3-year term rather than a 4 or 5-year term will save you a lot of money. But only if you can reliably make the payment each month. Remember that if you do not do this you run the risk of the car being repossessed which would result in high losses for you.
Consider borrowing less
If you can manage to drive your existing car for another year, consider doing so and putting more money aside for your new vehicle. The bigger your down payment is, the less you will have to borrow and the lower the overall cost of your new vehicle will be.
Improve your credit score
A strong credit score makes it possible to secure loans with a lower interest rate. So, before going out to shop for a car, improve your credit score. It is easy, but most of the things you have to do will take several months to have an impact. Therefore, the sooner you take steps to improve your credit score the better.
Choose the best person in the household to buy the car
Every individual has their own credit score, so check everyone in the household’s score. Then, consider sending that person out to buy the vehicle. But before you do this check that there are no clauses in the contract or in your insurance policy that could trip you up. For example, many insurance companies require that the person named on the policy is the registered keeper and the person who drives the car the most.
All of the above suggestions are easy to implement. Importantly, most of them will work regardless of where you live in the world.