The Potential High Cost of Avoiding Used Car Finance:
Unless you are in a fortunate financial position, you are likely to need some form of finance to purchase your next car. The conventional form of used car finance is a car loan. However, with used car finance rates fairly static, there is a temptation to opt for a quick fix and low-interest card. Unfortunately, you are likely to pay far more in the long run.
With standard used car finance Perth drivers will pay a set amount each month to cover the interest and repayment of the capital. However, when you use a balance transfer card, the lower interest rate is typically only for a set period. This means that unless you completely repay the amount in the first twelve months, the interest rate will immediately jump up to the card provider’s standard rate. This leap in interest could take the APR up to over twenty percent, immediately making your payments far higher just to cover the interest charges.
For example, if you buy a vehicle for $ 5,000 and make a card payment of $ 200 each month, you could, in theory, repay almost the whole sum, if the card was zero percent interest for twenty-four months. However, if there is an annual fee of $ 200 and the interest rate reverts to 21.75 percent after the introductory period, you could end up paying a further $ 638.
On the other hand, if you arrange a deal with low used car finance rates such as three percent, the $ 5,000 could still be repaid over the same two year period with a repayment of $ 214 each month. This rate would mean that you would only pay $ 357 in interest, and the loan would be fully repaid at the end of the two-year period.
Choosing a Great Car Finance Deal:
It is important to always be wary about zero percent finance deals. Finance companies are looking to make a profit, so you rarely get anything for free. Often “free” deals have a sting in the tail, such as a far higher rate after the initial period. To get a great deal, you should always compare the total cost of the finance deal over the loan term, to ensure that you don’t end up paying more in the long term. Don’t be distracted by the monthly repayment figures. While these figures are important to assess affordability, they can often be manipulated with longer finance terms, to make them seem cheaper.
