The Best Deals for Wheels

Are you looking to purchase a new car? If so, it pays to investigate various funding sources. Car dealers, despite the advertisements, may not always have the best deals on loans and interest rates. Because dealer rates can vary between car models, there can be huge variances in APRs (annual percentage rates). One study found that dealer APRs ranged from zero percent to nearly twenty percent.

Other Financing Options

When looking into other forms of personal loans, a person's credit rating will have an impact on the loan and interest. Based on a five-star rating system, those with one star will have a hard time obtaining a loan and will pay higher interest rates. Those with five star ratings will be able to obtain almost any loan they wish and will get a much better deal.

Personal financing is big business, and lenders are in competition for the business. One study found that more than half a million people expressed intent to purchase a vehicle between February and July of 2005.

Not only are car dealers working hard to obtain those financing loans, so too are other lenders. One bank recently rolled out a new buy-back financing plan that customers could apply over a two, three, or four years. Another study indicated that customers would be much better off if they did some loan shopping rather than simply going with the dealers' programs. How much better off? About £20,000 over the course of a lifetime for the average customer.

What is the best option?

Some experts believe the best choice for consumers is to take out a personal loan first, then pay for the vehicle. Personal loans currently average around seven percent or less, while car dealers average fifteen percent or more. This is not to say that the dealer's offer is always worse, however. Careful shopping and having a good idea of one's credit rating can increase purchasing and negotiating power.

Good Credit = Better Deal

Those with a better credit rating will obviously have more negotiating power, but this isn't to say that those with less than stellar credit will automatically be stuck with a higher rate. What it does mean is that for those with poor credit, even more research ahead of time can assure the best rate possible.

Depending on the type of loan, other options may include some type of refinancing down the road, before the original loan expires. It's also important to carefully weigh the costs of long term versus short-term loans. While interest rates on a longer loan may be much less, it could end up costing you much more in the long run.