There’s never been a time when as many people have been looking to change to a car with zero tailpipe emissions as today. However new electric cars are expensive to buy outright, so the vast majority of car buyers pay via a finance scheme. But what do you need to look out for with financing deals?
Over 91% of buyers paid via a finance scheme in the past twelve months, which only highlights their popularity, but vehicle finance plans come with hazards that you should be aware of prior to signing on the dotted line and driving away.
Your fellow motorists may be happy to commit to a four to five year fixed term but there isn’t a one-size-fits-all policy regarding vehicle finance. If you want the best deal, you’ve got to tailor the plan to your individual specifications. Otherwise, you could end up paying more for a car or van that’s not worth the hassle, or you might miss a payment.
The first step in agreeing to suitable terms is to understand the potential pitfalls. Continue reading to learn more about the top five traps you’ll come across.
No Gap Insurance
Vehicles are notorious for depreciating in value as soon as they leave the forecourt. Considering that there will be a difference between the market value determined by your insurer and the amount you have left to pay, this can leave drivers in lots of trouble. How? Imagine you’ve owned your van or motorbike for six months and someone steals it.
Suddenly, you have two to four years left on your agreement, and you still have to pay the fixed premiums, yet your vehicle has depreciated in value. As a result, the payout that you receive from the insurance company is less than the amount you owe and leaves a gap, one that you’re liable for and must pay by law.
Many buyers don’t realise this beforehand, and it can lead to a host of side-effects, from lawsuits and court action to a low credit rating as you don’t have the funds to repay the loan. Therefore, it’s vital to research gap insurance, or else you could end up in a situation where your shiny new motor might put your lifestyle at risk.
You might not require a massive amount, but it’s smart to have it as a backup plan regardless.
Paying A Small Deposit (Or None At All)
Great – there’s no deposit. That means you have less to pay upfront, which is better because it means that you’ll have more resources to keep up with the repayments. Sure, this could help you in the long-term, but only if the lack of upfront costs isn’t reflected in the overall price. After all, a finance deal is like a mortgage. The bigger the down payment, the less you pay over twenty years.
Will the fact that you’re not going to put down a lump sum come back to bite in you in the future? It depends on the dealer and whether they’re offering you the deal of the century. However, mostly, it’s a sign that your payments will be higher as it’s a surefire way to milk money from customers.
Firstly, it’s essential to clarify whether the amount is greater without a deposit. You can do this by asking the sales rep and then double-checking similar finance plans with separate companies. If it’s going to be more, you should consider paying a deposit or down payment to lower the fees.
Remember, you won’t only save money on smaller payments, but you’ll have less interest to pay, too. It doesn’t have to be much. A couple of hundred pounds can be enough to make vehicle finance deals twice as affordable.
Failing To Book Regular Services
You’ve signed the contract and are paying back the money you owe. As far as you’re concerned, the vehicle is yours. At the very least, you’re the one who’ll decide whether it requires servicing. The dealer isn’t even driving it, so it has nothing to do with them! All of these are valid and logical points; however, it doesn’t matter.
Car and van sellers, especially if you’ve opted for a PCP structure, usually write into the deal that you must service the vehicle regularly. The reason, to them, is straightforward – they guarantee the car and its value until the end of the term. One of the 9 things your parents taught you about new vans for sale is that they shouldn’t break down, yet anything can happen.
With that in mind, it’s crucial that you outline how many times the van requires servicing. Not only that, but you have to go to an official or accredited mechanic or garage. If you don’t, the dealer will say that you’ve voided the contract and they aren’t liable for any damages. You’ll have to pay for the repairs out of your pocket.
A service is something you’re happy to do. Of course, it’s something that you assume isn’t necessary from a legal perspective as you own or rent the vehicle.
Wear And Tear
Damage to the vehicle shouldn’t be too complicated. Anything that happens as a result of your actions is your problem, whereas the dealership will cover everything else. Typically, car owners view this as anything that goes wrong under the bonnet as you’ll rarely damage the inside of a vehicle by driving it.
Financers have a different opinion. If they class the problem as wear and tear, you won’t have the luxury of asking them to pick up the cheque. Rather, you’ll have to pay again. Are you starting to see a pattern? This shouldn’t stop you from utilising finance plans since they are useful, but you should do two things.
For starters, you have to read through the contract and check whether wear and tear applies. If it doesn’t, you don’t have anything to worry about as you’ll only be liable for cosmetic damage. If it does, you must ask for the report history and a copy of the last MOT. You might even want to service the vehicle at a garage that you trust just to be sure.
You can put your faith in a strange dealership, or you could go the extra mile. Considering that the phrase wear and tear is vague, it might be worth the effort.
Exceeding The Mileage
Agreeing to a set amount of miles that you can’t go over is a smart way to reduce the cost of vehicle finance. This is because it lowers the chances of excess wear and tear, as well as other expensive issues that impact you and the seller. Also, if you go over the limit, you’ll be charged per mile.
Of course, exceeding the mileage can be a problem if you aren’t organised. Some plans only charge a couple of pence, whereas others go as high as thirty to fifty pence. The latter will result in a pretty big expense, which is why you must strike a deal where the mileage is higher than you require.
By doing this, you should avoid unnecessary fees, particularly if you agree to a higher rate regarding exceeding your mileage. As well as this, please be sure to keep tabs on how far you drive each year.
It doesn’t take much to track your mileage, yet it could save you a fortune and prevent you from falling into a common finance trap.
Vehicle payment plans are great. You just have to understand how to use them to your advantage.