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How to Beat the Car Finance Crooks

05/04/2016 12:06 | Updated 05 April 2016

New registration plates came out last month and I have already seen a fair few 16 plates tearing around the Oxfordshire countryside. However, I am not convinced that driving a brand new shiny car off the forecourt is really the best option for the savvy buyer and there are actually lots of bargains to be had buying a car second hand but it can be daunting as you are dealing with a lot of money and you have to trust the person you are buying it from.

On the whole private sellers tend to offer the lowest prices but you need to be careful as making sure the car is up to scratch is YOUR responsibility and the last thing you need is to get home and discover that there is a load of rust under the bonnet. Although a private buyer is protected under the Sale of Goods Act if the car does not match the description given by the seller, it can be hard to prove so keep hold of adverts so that you have some comeback if it all goes wrong. I drive past so many cars perched on grass verges with 'For Sale' signs stuck in the window but you often have to take a leap of faith if you aren't particularly motor savvy (like me!).

I have a lot of friends who have found the whole car buying process terrifying so for them going to a second hand car dealer has been the better option. I have always told them that as long as you have done your research and know what other people are paying then you can negotiate and get a good price. Although used car salesmen might not offer the lowest prices, it is much easier to make a complaint in the event that something goes wrong and they aren't all Arthur Daley wheeler dealers anyway. Just trust your instincts and you'll be fine!

Sometimes though, all you really want is to smell that brand new upholstery (although you can actually now buy a 'new car' air freshener scent - yes, really!) so if you have your heart set on a brand new motor then think very carefully about how you want to pay. Car finance can be a massive con and there are a lot of people getting very rich off the finance deals they are making! However, there is really no single right answer as you need to tailor the right solution to your own personal finances.

Obviously saving up rather than borrowing would be the ideal way to buy a car, but I appreciate that this isn't possible for a large proportion of the population. The golden rule though is to NEVER accept the dealer's finance deal without comparing loans elsewhere first. I write a regular magazine column helping people solve their financial problems and I am staggered by how many car finance crooks are out there preying on people who need a car but can't afford to buy one outright. It is so unfair. So what are the options?

Personal Loan - Your dealership may offer you a personal loan but always compare your dealer's rate to the cheapest on the market. The lowest interest rates are usually for medium loans of between £7,500 and £15,000. For these you should expect to pay around 4% interest. For higher loan amounts then the rate will be closer to 7%. However, the best rates are usually reserved for those with an excellent credit rating.

Flat rate loan - Watch out for car manufacturers offering you a 'flat rate' loan as this is not the same as APR and means you'll pay a flat rate percentage on the original loan amount. So if you borrow £10,000 and after 4 years pay off £9,000 you'll STILL pay interest on £10,000 and not the remaining £1,000. A flat rate of 7% might sound enticing but it equates to more like 15%!

Higher Purchase Agreement - Whilst this may sound similar to a loan, the main difference is that the debt is secured against your car. This means that if you can't make the repayments, the car finance company COULD repossess the car to help pay the debt. You should also watch out because sometimes you won't know the actual APR they'll charge you until after you have applied.

Personal Contract Purchase - Some people prefer to lease (basically a long term rental) or they take out a Personal Contract Purchase. If you take out a PCP, you pay a deposit and then make low monthly payments (lower than an HP agreement) for two or three years. By this stage you will have paid off about two thirds of the car and are left with three choices - you can hand the car back, pay a one-off payment to buy it or trade it in and start a new deal.

Credit card - Now this is only for the savviest of savvy people as you have to be REALLY disciplined but if you have a great credit score and can get a card with a high credit limit, you could buy your car with a 0% credit card! As long as you can pay off the amount within the 0% period you will pay no interest at all - ha, take that car finance crooks!!

Of course, there are other ways to beat the car dealers too. When I bought my Beetle a couple of years ago, I was also not afraid to haggle for extras. By being quite gutsy I got my insurance, road tax, 3 years' worth of servicing and even a child's car seat thrown in for free! If you don't ask you don't get and dealers have loads of 'under the table' offers for you to exploit - go on give it a go!

For other ways to borrow money, visit letssavemoney.com

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