Choosing a Car Loan

Around half of new car purchases are at least partly funded by a loan - as the second most expensive purchase after a house few people have such a large chunk of money sitting around doing nothing, and even if they do zero per cent finance rates maybe available through the dealer. Check the small print to make sure you really are choosing the best car loan for your situation.

The first thing is to squeeze the dealer on the price in the first place - the less you pay, the smaller the loan. If you plan on taking a loan through the car dealer, who can usually offer competitive rates you're in a stronger bargaining position. They get commision on the arranging a loan for your car so try and push the price of the car down for you as he can make his money up elsewhere.

Many financial experts suggest not stretching car expediture - loan repayments, petrol, servicing, insurance etc beyond 10 per cent of your monthly income. Do your research before you turn up at the dealer. Know what the current competitive rates are and make sure you're dealing in AER (annual equivilant rate) to ensure a direct comparison. Watch out for the potential extra charges such as a fee if you loan is paid back early, or you want to pay a bit more off one month. The piece de resistance of loans is loan protection - an insurance that will pay the minimum amount required should you be taken ill or lose your job. A quick play with Barclay's loan calculator reveals their loan protection costs over £1,600 based on a £10,000 loan over three years.

Experts also recommend putting down at least 20 per cent of the car price towards the purchase of the vehicle, either in cash or by trading in your old car. Debt problem advisor the Insolvency Helpline has seen a 35 per cent rise in worried car owners' calls in six months with the value of car loans has risen by 10 per cent in a year. So shop around and make sure you're happy with the deal you get, even when the excitement of your new car has rubbed off 3 years down the line.

Get a Car Loan from Welcome Car Finance.

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