Before signing on the dotted line, it is important that you always read the terms and conditions of the scheme and shop around to find the best deal. It may be a little tedious, but its important that you know as much about the finance agreement as possible.
Firstly, there is the Annual Percentage Rate (APR) which all lenders must quote by law. The lower this figure is, the cheaper it is to borrow the money.
Then there is the Repayment Period. For example, £200 a month over three years (total repayment £7,200) is £1,200 more than £250 a month over two years (total repayment £6,000).
The faster you repay the money, the less it costs you.
Finally, compare any finance arrangement fees and penalties that could be imposed for exceeding a mileage limit, repaying early or returning the car in poor condition.
You need to compare the cost of the car had you bought it outright for cash with what you will pay overall at the end of the agreement. The difference between the two figures will give the total cost of borrowing the money. Go with the best deal, but first read all the small print!
Caution: If a finance company requires a larger deposit, or a guarantor, some dealers may use this as an excuse to raise the interest rate. Weekly payment systems may be used to make borrowing large amounts at high interest rates seem very tempting. Check what the APR is!
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