Van Insurance

It’s easy to get caught up in the emotion when purchasing a new car. Many people do this at the expense of choosing the most appropriate car loan and, at the end of the day, live to rue the decision.

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It is not rocket science when it comes to understanding that the real price you pay for a car is not the dealers invoice, but the car loan. A $30,000 motor vehicle financed by a car loan at 9% over a five-year term will actually cost you $37,086.89. It makes more sense to negotiate a cheaper home loan than it does to obtain a $500 discount from the dealer.

Yet many people get carried away at the negotiation stage when they see the car on the showroom floor and become all too eager to sign the contract and have the dealership do all the work for them by obtaining a car loan at the same time. The fact is, dealerships are very keen to offer finance as they make money not just on the sale the vehicle, but also on the finance package as well. They can charge fees of hundreds if not thousands of dollars if buyers do not take the time to read the fine print.

The excitement of driving away in the new vehicle is soon replaced by the remorse of a borrower who ends up paying more than he or she bargained for.

That’s why it’s not surprising to find people looking to change their car loans after they discover they are paying too much. Refinancing a car loan may be a simple process but there are several things you need to be aware of.

Before agreeing to any refinance package, obtain several quotes from various lenders to make sure you don’t repeat the same mistakes. This means looking at not just interest rates the new lender will charge but also any additional fees like ongoing monthly fees or early repayment fees. Additional monthly account keeping fees substantially increase the effective rate of interest you are paying. For example a $30,000 car loan over five years at 9% will cost $618.11 per month. But if there is an additional $10 a month account keeping fee the effective rate of interest rises to 9.71%! That’s why it is important to compare apples with apples before you make your decision to refinance.

You need to pay special attention when it comes to early repayment fees. This applies to the loan you intend to refinance too. If there is an early repayment fee, it could negate any savings you make by negotiating a cheaper rate through a refinance. Make sure you get an accurate payout figure from your current lender before making a decision because you could actually lose money in the process!

Switching a car loan is not a difficult process provided you do your homework first. As you can see from the above information all car loans are not the same and you need to take your time before making a decision.