Buying Cars on Finance

When you’re shopping for a new car, it’s important to consider more than just the vehicle itself. You also need to know how much you’ll pay for the loan, as well as running costs like insurance and road tax. Interest rates can vary, and even a few points lower can mean significant savings over the life of the loan. So, before heading to the dealership, check out loan offers online from peer-to-peer lenders or other banks.

Using a calculator to determine your budget and financing needs can help you choose the right car for your needs. For example, if you know you can afford $300 a month, then you can narrow down your options to cars that cost around that price. This will help you avoid overspending and possibly paying more than the vehicle is worth when you sell it.

Another tip is to make a down payment, which can help you qualify for better loan terms. CR recommends you put at least 15 percent down, or even 20 to 25 percent if possible. The dealer will typically add in what they think the car is worth now – called the Guaranteed Minimum Future Value or GMFV – to figure out how much you need to pay up front.

It’s also worth knowing the difference between loans and leases. Auto leases, which are sometimes called personal contract purchase or PCP, can be more affordable than buying, but you’ll lose ownership of the car during the term. cars on finance