Congratulations are in order. You’ve found the car of your dreams and the dealership just so happens to have this ridiculously good deal $4999 off! Only $300 a month! 0 per cent interest! You have a chat with the car salesman and you negotiate a seemingly amazing deal for the car.
The salesman then guides you into the dealership’s F&I office; it’s just a flashy name for Finance and Insurance. The business manager welcomes you in, and now you are going through the final formalities of signing various forms and agreements. As you are doing this, the business manager runs a credit check for you so that they can arrange that wonderful 0 per cent financing. Suddenly he has a concerned look on his face, and tells you one of the following:
- Your credit score is problematic and is lower than the required level for the 0% interest rate, therefore, the best that they can do for you is a 7% interest rate.
- The $4999 discount is only for a specific model made only in a specific year of a certain brand, therefore it does not apply to the car that you want.
- To be eligible for the $300 a month repayment or 0% interest rate, you must purchase their super deluxe double XL package which includes car tinting, interior/exterior insurance and other miscellaneous items. The dealer also assures you it won’t cost you much per month.
- As part of their finance deal, you must also purchase their special international diamond 3 year car warranty for $1,000.
At this moment, adrenaline is pumping through your body, you are too excited about your new car and you have already made your decision to buy it. So you agree to all these conditions, since they don’t sound too bad at the time. What you won’t be told is this:
- Every time a dealership does a credit check on you, your credit score deteriorates. Making it harder for you to get loans in future.
- That credit score which they looked so concerned about might actually be higher than what they tell you. In truth, you might easily be eligible for their advertised interest rate.
- That 0% interest rate is only available when you buy the car at a higher price. This often means you repay more per month than a car finance deal which charges a market interest rate.
- The costs for the deluxe package may add up to an extra $80-150 per month, it doesn’t seem too much by itself, however over the life of your loan which is usually four years, it can end up costing you more than $7,200.
- Finally, that special international warranty, will require your car to be inspected at select dealerships, it won’t cover the inspection costs and faulty parts will only be replaced by second hand parts.
You’ve now bought your dream car and at the same time, handed a small fortune to the dealership! However, it doesn’t have to be like this!
Arrange your car finance first! A professional mortgage broker can assess your financial situation as a whole and guide you step by step through your credit report to find the most suitable loan for you.
- The process is highly transparent,
- You will not be required to buy any warranties or pay hidden fees.
- You will be quoted a clear interest rate and,
- More importantly, know the exact monthly repayment.