Break Into Bank Or Delve Into Dealership Debt

By: Onome Okwuosa
Walking into a dealership knowing that you could very well drive off in a shiny new four-wheeled Betty can make even the hardest of men giddy with excitement. Picking out the paintwork, the trims and whether or not you are going to opt for the soft top or the classic hard top can take hours.

Once you have got all that hard work done its time to settle down to the nitty gritty of the matter, the money. It’s all very well choosing the vehicle, the alloys and the fuel type but when it gets to the serious matter of handing over hard cash there’s no shame in breaking out in a cold sweat!

Do you go with the pushy salesman and his shiny pinstripe suit who’s screaming the praises of their new purchase plan that will knock the socks off any other financing option on the market; or do you look elsewhere? It is tempting to go with your butterflies and swiftly sign on the dotted line so you can grab the keys and zoom off, doing so may be the beginning of a bad relationship with your new baby. Acting in such a hasty and blinkered fashion may cost you more money than you can afford, could potentially lead to payment defaults and sadly, the premature relinquishment of your car.

If you value your car-to-be, and want to ensure your financial ability to maintain a relationship with her, then it is vital you do all the necessary research regarding the numerous finance options available to you, and not just the ones on offer by the dealership. Keep in mind the salesman is trying to sell you two different products that are not inextricably linked, choosing not to take out their finance, whether it is HP or PCP does not mean you lose out on the paramount product; your car.

As we are currently in the murky mires of a credit crisis the majority of lending institutions are hiking up their rates for taking out a loan, as it stands for those that have an adverse credit rating are likely to pay back their loan with a massive APR, some being as high as 22%. If however you have looked after your credit you are likely to be offered a more attractive rate, however it is still likely to be considerably higher than the current base rate of 5%.

That said, a little bit of research can go a long way to supporting your pocket and the change in them, this can be seen by the rates offered by the banks which are currently trying tore-align themselves with the base rate. As it stands Alliance and Leicester is offering a competitive rate of 6.4%, similarly Cahoot and the majority of other popular high street lenders are trying to keep their rates down, hovering around the 6% mark.

When it comes to borrowing from any institution the rule of thumb to saving money is to look for the offer with the lowest APR, there are other factors involved but this is usually the best starting point for comparison. As noted above it is clear that if the dealership is offering you a rate of 12.3% because your credit is in good stead and are screaming that this is the best offer on the market, a few clicks of the mouse on any comparison site will show this to not be true, if you do have good credit then it is in your best interests to go elsewhere.

However this does not mean that banks always offer the best rate, at the moment Renault dealerships can offer finance options with rates as sweet as 5.9%, undercutting the high street lenders by a long shot. Such information will only become known to you after you have done the necessary research; remember the car will always be there, if you don't do the research and leap before you look, in a few months your four-wheeled companion may not be.

Onome is an author of several articles pertaining to Debt. She is known for her expertise on the subject and on other Business and Finance related articles.