How to get the best deal on your car finance

Last Modified 16th of February 2021

Car finance is readily available, even if your credit history is poor. However, it’s also big business, with car dealers sometimes earning more commission on the finance than they do on the car itself.

Around three quarters of the 700,000 new cars bought each year were bought with car finance of some kind. But with the complexity of finance options available, how can you be sure you’re getting the best deal?

Do your homework

Before you even start looking for a car, take time to learn about the different finance options available. Hire purchase, leasing, a personal loan and personal contract plans all work differently and have their own advantages and disadvantages. It’s important to choose the right car finance option for you and your circumstances.

Be sums savvy

A salesman will work hard to get you to sign up to his preferred method of finance, and there are all kinds of legal but misleading ways of presenting the figures to you in order to make an option seem more attractive than it really is.

Make sure that you are given the APR. This is the only rate which will allow you to compare one option properly against another, as it’s the only one which includes fees and interest. Even then, be sure that you’re comparing finance of the same duration and loan amount.

If you’re given daily or weekly costs, stay alert. Of course it sounds cheaper to say that your new car will cost you only £8 per day than £240 per month or £2880 per year – but don’t fall for this. Always ask for the total amount payable.

Another common ruse is for the salesperson to add a few years onto the loan in order to make the repayments look cheaper. Yes, you’ll pay less each month if you pay over five years instead of over three, but it’s certainly not cheaper overall.

Man Managing Debt

Be prepared to haggle

If your credit is good enough, get a quote for a personal loan from your bank and take it with you when you buy your car. Use this as your starting point. Anything more expensive on offer from the dealer is a no-no, regardless of the bells and whistles they attach to it.

You can also visit more than one dealership and get quotes from each one. You may well find quite a considerable difference in what you’re offered, depending on all kinds of things from how close the salesperson is to their target to which cars they’re pushing hardest that week.

If you like the look of a deal you’re offered, but it’s close to the personal loan figure or slightly above it, ask for extras to be included with the car as part of the deal. If you don’t ask, you don’t get!

Essentially, the golden rule is this – don’t go into arranging your car finance deal with your eyes closed. Many salespeople work hard to get you the best deal available and they are not your enemy. Courtesy, respect and professionalism go a long way on both sides of the deal. For those who are slightly more unscrupulous, however, the whole process is a game. Learn the rules and stay one step ahead.