You may have seen recently car yards offering car finance at extremely low rates, sometimes as low as 0%. Sounds too good to be true? It isn’t, it’s actually a great option if you’re considering a new car purchase. Here’s how it works.
Car manufacturers have had to get very creative to try and sell more cars due to a very competitive market. So, what’s the catch? The reality is, there is no catch, it’s called a subvention. The car yard writes the finance at 0% or 1% and actually loses money on the finance deal. However, when they put their claim in to the manufacturer for the sale of the car, the manufacturer rebates the amount lost on the finance deal to the car yard plus a small fee for writing the deal. So, the car yard is not out of pocket, the cost of the finance has come out of the manufacturer’s profit on the car. Better yet, you haven’t paid the cost of the finance!
The other option of course is to obtain your car finance through your broker. Remember, financing through a car yard is designed to be quick, to get you into the car and out the door as quickly as possible. A car yard will usually do finance quicker than a broker, but in some circumstances, may charge a higher interest rate for the convenience. Remember though, a car yard will never take your personal financial situation into consideration. Their job is to get the car out the door as quickly as possible.
There are many different ways that a car loan or equipment finance can be written and sometimes, if you have equity in your house, this can be used to obtain lower loan fees and interest. This is where your broker will take your individual circumstances into account and recommend the most suitable product or strategy available to meet your needs, having regard to your entire financial situation.
So, if you’re thinking of buying a new car and want to discuss your financing options, contact your broker today.