Whenever you want to buy a new car or motorbike, it’s likely that the dealer will offer you financing right there on the spot. When they do, ask these five questions before signing on the dotted line.
How much can I afford to spend?
The exciting idea of getting behind the wheel of a brand new vehicle can make it easy to start focussing solely on the car itself. However, you need to ask yourself whether or not you can afford this car before writing up any paperwork. It’s OK if you don’t want to drive something cheap; just remember that financing shouldn’t send you into debt.
When thinking about how much you can afford to spend, think about how much you want to spend overall as well as how much you can afford to pay in monthly payments.
What is the APR (Annual Percentage Rate)?
This is important because it shows how much your loan really costs.The APR is the annual interest rate plus all of the fees you are charged. Some dealerships will offer very low rates for a car loan, but they’ll make up for it by tacking on an additional 8% or more in financing charges and fees.
Make sure to read over documents carefully when taking out a car loan to avoid paying too much.
Interest rates can vary greatly depending on which lender you go with and how much risk that lender feels you pose. Interest rates are typically higher for people who don’t have a good credit score, because this means that people are less likely to repay the loan. Keep in mind every lender and dealer will offer different rates, for example if you’re comparing Yamaha finance rates, you will likely find that the rate from a bank is very different from buying direct from a Yamaha dealer.
What are the terms of the loan?
Different types of loans offer different payment options. For example, you can get a 36-month loan, where you have to pay off all of the money in 3 years without any extra fees or penalties for early repayment. You can also choose to have your payments broken up into equal monthly amounts.
When taking out a loan, read through the offer carefully before accepting it. Many people have made the mistake of not reading the fine print on their car loans, resulting in high monthly payments they can’t afford.
What fees and charges are involved?
Some lenders will charge you a fee if you repay your loan early.Others will charge you a fee if you make a late payment, and some lenders will even charge you for an “administration” fee if they send your payment to the wrong address.
Make sure to ask your lender whether or not they charge these types of fees before signing on the dotted line.
Is the loan secured or unsecured?
A secured loan is one that involves an asset as collateral. In other words, if you do not repay the loan your lender will have the right to take possession of your car. Unsecured loans are those where there’s no collateral being used, which means you don’t need a car to qualify for a loan.