Don't buy a new or used car without reading our top tips for getting a cheap car loan.
People are so vain. An estimated 450,000 people will rush to get a brand new car this September, just so that they can have the latest number plate. I find this hard to comprehend, especially when cars that have been owned by someone else, but are still less than a year old, can be 30% cheaper! If an as-good-as-new car comes with a decent warranty, it's a no-brainer to me.
However, if you're in the market for a new motor, you'll want to make sure your car loan is as cheap as possible. Try these four tips:
Use a personal loan, not dealer financing
If you get a loan through the dealer, you'll effectively pay interest to both the company that the dealer uses for finance and to the dealer itself for its own cut. That's why the average car loan through a dealer costs an extortionate 12.5% interest a year.
It's much cheaper to get an online personal loan, as the interest rates on these are currently less than 6% per year. Comparing some figures, the average new car costs about £12,500. Over three years, a loan at 12.5% will cost you £410 per month and £14,760 in total. A loan at 6% will cost you £378 per month, and £13,608 in total, so you'll pay over £1,100 more if you get the expensive dealership loan.
Regardless of your credit rating, when it comes to buying cars, it's usually cheaper to get all the extras and the financing from somewhere else.
Try our loan centre for a sub-6% car loan!
Don't fall for the 0% finance con!
It's difficult to negotiate both a significant discount on a car and obtain 0% finance as well. If you have to choose, go for a minimum 10% discount on the car. Here's why:
Usually it's just people with excellent credit ratings who are offered 0% finance, which means you should be able to get a cheap loan elsewhere. Let's say your car is worth £13,000. Over three years, with a 0% finance deal, this works out at £361 per month. However, if you knock the price down 10% to £11,700 and get a personal loan at 6% you'll pay £353 per month, saving you almost £300 over the term of the loan. If you can knock off 15% from the car price, it'd only cost you £334 per month, which is a saving of almost £1,000!
See this article for more detail on car finance deals
Car insurance: another extra to avoid!
OK, you can't avoid car insurance. That would be illegal! However, you will almost certainly get a better deal on your car insurance if you buy it from somewhere other than your dealer, so get lots of quotes.
Why not start your search forcheap car insuranceright here at the Fool?
Here's a thought: don't borrow, save!
An AA survey at the beginning of the year found that 26% of car buyers intended to buy their next car using money they had saved for that purpose. Its latest figures show that 37% plan do this. That's great news, as debts always cost a lot more in the long run. However, only 17% said they'd use a personal loan, which means that the majority of the remaining 46% are probably getting finance through the dealers. These people need to learn the ways of The Fool!
> Compare personal loans, compare savings accounts and compare insurance quotes, all through The Fool.
