There are two issues involved with buying a car - the subject car itself and the manner of paying for it. First he will be offering you cars, and secondly he will be offering you finance packages. This is how you should look at it. The fact of the matter is you may probably wouldn't buy a car from your bank, even if they started offering them, so you may wish to apply the same scrutiny to the finance packages available at the car dealership and choose to buy only your car there and the finance package elsewhere.
It is not however to be misconstrued to mean that the buyer should reject outright the financial package offered by the dealer. The point is that the buyer is not obliged to agree to the terms offered by the dealer because he has the right to choose the financial package that he is comfortable with. In other words, the car buyer has several payment options - he can accept the dealer's offer or he can make his own arrangement with a bank or financial house, or he can secure a loan and pay the car in cash.
The main consideration in a financial package is the interest rate that is imposed on the loan. The primary way to calculate the charge of any credit is by using the APR or annual percentage rate. This calculates the cost of the loan using a standardized formula and all lenders must use the same method of calculation. However, just because a car dealer's APR looks attractive does not mean your search is over. You should also, always find out how much the car would cost if you paid in cash. The buyer should also inquire from the dealer if there is and how much will be the discount if the car is to be paid in full. This is important because a discount is a reward for paying cash, and interests are penalties for buying on credit. If the cash price is lower, then you may be better off getting the loan from elsewhere and paying for the car with cash, this will take advantage of the better price and you will have a smaller amount to pay back to your lender.
The buyer should also look to the amount the installments in relation to the down payment and the closing payment. These are payments that are paid at the beginning or end of the term of the loan, and while the monthly payment terms may be attractive, it could well be the case that there are large additional payments to make and you should not forget to calculate these in when pricing the finance.
If you are buying a car on credit, the financial aspects is of equal importance as the car itself and should be taken into account when you buy a car.
It is not however to be misconstrued to mean that the buyer should reject outright the financial package offered by the dealer. The point is that the buyer is not obliged to agree to the terms offered by the dealer because he has the right to choose the financial package that he is comfortable with. In other words, the car buyer has several payment options - he can accept the dealer's offer or he can make his own arrangement with a bank or financial house, or he can secure a loan and pay the car in cash.
The main consideration in a financial package is the interest rate that is imposed on the loan. The primary way to calculate the charge of any credit is by using the APR or annual percentage rate. This calculates the cost of the loan using a standardized formula and all lenders must use the same method of calculation. However, just because a car dealer's APR looks attractive does not mean your search is over. You should also, always find out how much the car would cost if you paid in cash. The buyer should also inquire from the dealer if there is and how much will be the discount if the car is to be paid in full. This is important because a discount is a reward for paying cash, and interests are penalties for buying on credit. If the cash price is lower, then you may be better off getting the loan from elsewhere and paying for the car with cash, this will take advantage of the better price and you will have a smaller amount to pay back to your lender.
The buyer should also look to the amount the installments in relation to the down payment and the closing payment. These are payments that are paid at the beginning or end of the term of the loan, and while the monthly payment terms may be attractive, it could well be the case that there are large additional payments to make and you should not forget to calculate these in when pricing the finance.
If you are buying a car on credit, the financial aspects is of equal importance as the car itself and should be taken into account when you buy a car.
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