Car Loans and Finance

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Car Loans and Finance

Just when you thought you were getting to grips with these prices and probably getting somewhere with your negotiations, the salesperson starts talking car finance. This is another “minefield” area where they can use several tactics to disguise what may be going on.

The first thing you have to understand is that selling car loans is BIG business. As an Internet user, you only have to look at how many spam emails about car loans you get, the number of websites offering loans for cars or the number of adverts on TV by loan brokers there are, to realise this fact. Finance companies pay out quite large commissions to companies that put business their way. When a dealer organises the finance for your car purchase they will get commission from the finance company… this can be several hundred pounds!

The good thing about car finance is that it is quite simple and easy for you to check what you are actually being offered… and you may be surprised!

However, one of the problems for the average car buying member of the public is that there are so many factors involved in a car deal it can be difficult to separate them and “see the wood for the trees”.

Prior to reading this website, all most people want is “a good price” for their car and repayments that they can afford. Sadly, if they think they have got both – they assume they have got a really good deal and often aren’t too concerned about the details… but… the devil is in the detail and they have a very good chance of being fooled:-

Let’s say that a dealer offers an inflated (false – remember!) price for a part exchange and then proceeds to work out “a deal”… let’s assume that they offer £500 more than the Trade price for your car. As we have seen, they CAN’T afford to do that – so where do they claw back this money from? It depends what they think they can get away with, how much they think they can fool YOU!

* They might have already added on this amount to the car you want to buy, in which case they retain the maximum possible profit in the deal.

* They may have been prepared to drop the price of their car by a similar amount anyway, but now don’t as they have given a false price for your car. These are the ones that will later say “Do you mind what price your car comes in at “on paper” etc…”

* They may sell you a “less than favourable” car finance deal. In this case, they often get you to agree to a repayment amount and then close the deal based on that. However, car loans can be arranged at different rates and it may be that they are using a higher rate than necessary. Or it may be that, based on the repayment amount, you are actually borrowing more than you thought! If you are not careful – what they seem to be giving with one hand can so easily and expertly be taken away with the other.

The longer you spend in a particular dealer the easier it is for them… by the time you have spent an hour or two listening to the sales patter and arguing about prices and values, the salesperson scuttling backwards and forwards to the Salesmanager (see section about tactics later in this website), it’s easy to get to a stage where you just want to do a deal and “minor” details become less and less important. You end up focussing on the “cost to change” and if you think you are getting a good price for your car and the repayments are affordable you think you have done well! WRONG!

Obviously, the amount you need to borrow is the price of their car minus the price of your car minus any discount you have managed to negotiate but, where the bottom line (the cost to change) is concerned, any one of these three figures affects the others. Two will always be unknown - you will never really know how much their car stands them at (the price they paid for it plus all the costs in getting it ready to sell) so you will never know how much profit the dealer has got to play with and how much discount they can reasonably give. In addition, most people, prior to reading this website, will not know how much they are really getting for their car.

For the average customer who doesn’t know any better, it is easy for the car Salesmanager to put a deal together which hides the real figures. If they have “offered” far more than the part exchange is worth, they can get this money back by altering the price of their car and/or arranging the car loan at a rate that generates them the most money. Once the deal has been agreed, they can then “tweak” the figures by altering the “paper” values of both their car and your part exchange. As long as the repayments remain the same the customer is usually always happy. However, it may be that the car finance has been arranged at a higher than normal rate, or that the amount being financed is actually higher than the customer had realised.

See the next section about how you can compare car loans...

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