More than 90% of cars on Australian roads are currently under some type of finance. Finance has become a very common part of purchasing a car these days. However, there are some very common finance mistakes that people make over and over again. Read this article to find out what the most common finance mistakes are and how you can be a savvy buyer and avoid these finance traps.

Not asking the right questions

It is very easy to walk into a dealership and find the perfect car! Instant gratification takes over and you want to take your new car right then and there. This is perfectly normal; however, it is important to ask the right questions both regarding the car as well as the finance you are looking at.

Make sure you know exactly what year the car was built and manufactured in. Sometimes dealers may offer a vehicle as a 2021 model for example, but it was actually built and complied as a 2020 year model. Not only will this affect your resale value, it may also affect your finance approval as well.

With regards to your finance, make sure you know exactly what the total cost of the loan will be, including the interest component, the Annual Percentage Rate (APR) as well as the comparison rate, the monthly fees and any initial loan setup costs or application fees.

Not looking at all your options

It is vitally important to remember that as the buyer, you have options. You have the option to say ‘I will think about it’ and walk away. With both vehicles and finance, you are in control and it is important to look at a few options to help decide what is right for you. Sometimes when buying a new vehicle, writing out a pros and cons list can help you to take emotion out of the equation and make a logical buying decision based on your actual needs in a vehicle.

Not comparing apples with apples

When comparing vehicles and finance, it is super imperative that you are actually comparing the same features so that you can make an informed decision.

For example, with finance, you can use the comparison rate to effectively compare finance packages. A comparison rate as opposed to a standard interest rate actually includes all upfront fees & charges, ongoing costs and termination fees as well as the base interest rate. Comparing comparison rates helps you to see a ‘birds eye view’ picture of the actual interest rate on the loans you are comparing.

Taking the first ‘deal’ you see

You do not have to take the first deal you see. We cannot stress this enough! As stated before – you have options! You always have the option to walk away and say you’ll think about it. Many dealerships will try the ‘today only’ ploy to get a commitment out of you. But remember if they want your business, they’ll still be able to honour that deal the following day as well, once you’ve had time to think about it and make up your mind that it is definitely the right choice for you.

You also don’t have to go for the first fancy interest rate advertised in a dealership window that you see. A lot of the time these ‘gimmick’ deals can end up costing you more in the long run. Which brings us to the next point…

Falling into the ‘zero percent finance’ trap

Zero percent finance, also referred to as subvented finance, is where a dealership or manufacturer will decrease the cost of the advertised finance rate if you buy particular vehicles from them. Sometimes these advertised interest rates are as low as zero percent which sounds like a fantastic deal right? Well, not always.

That old saying – ‘there’s no such thing as a free lunch’ certainly applies to subvented finance. So here’s the thing about subvented finance – it takes away your choice and control. When the dealership has control of your finance, you have no bargaining power. They know how much you can borrow and have no reason to discount the cost of the vehicle – because they own your finance and they make up the loss of interest in the inflated price of the car.

A lot of the time you can save much more money by securing pre-approved finance elsewhere before even walking into the dealership. This is because you retain the power to negotiate on both your finance and the price of the car. We often find that negotiating a discounted purchase price on your vehicle and finding a low rate finance option combined, means you end up paying lower weekly repayments (therefore lower total repayments) over the term of your loan. This may sound complicated, but remember our team of experts are here to help!

So if you want to avoid making these common finance mistakes that can end up costing you dearly in both time and money, speak to the experts at Loans For U. Our specialist Finance Consultants can compare products from over 40 of Australia’s leading financiers to find a tailor a finance solution that best suits your specific needs. Contact us today on 1800 538 287 for an obligation-free chat about your finance needs or simply apply online now.