Car finance – always read the small print

If you are looking to get a new or second hand car then you may well be tempted with taking finance out to cover the cost or part of the cost of the vehicle. Finance can be a great way of spreading the cost of a car over a number of years but you need to be sure that you know what you are taking on, the terms an conditions of the finance and how much you will end up paying for the car overall.

Many finance companies will simply take to you about the monthly amount and term of the finance but may not talk about the amount of interest and the APR. The APR is the annual percentage rate and is a percentage that relates to the interest you will be charged annually over the term of the loan. APR’s can range drastically from as little as a few percentage upwards of a thousand percentage. The higher the APR the more you will be paying back overall.

Always check how much you will have paid back in total including interest by the end of the finance agreement and this will allow you to work out how much in interest and charges you will incur. Often once people have this information, they reconsider the finance or will start to shop around to get a lower APR. Bank loans are often lower than taking out car finance but not sometimes the lending restrictions are stricter.