MANILA, Philippines - So you've finally decided that you’re ready to get a new car. If you’re like most consumers, you will probably take some form of financing to pay for it. Chances are, you’ve seen the financing deals being offered by banks and dealers and have started crunching some numbers. Given the wide range of plans advertised by car dealers and banks alike, it is easy to be overwhelmed by the choices out there.
In buying a car, as with all large purchases, it is important to do your homework. A car purchase is almost always a major expense, and if you take it on a financing plan, you would be making payments for the next 12 to 48 months. In other words, a car loan is a long-term commitment that you have to prepare for and think about.
Here are a few points to remember to make sure that you get your dream car at financing terms that are most appropriate for your needs:
1. Make sure you can afford it.
Before going into the market and deciding on a purchase, do some pencil pushing. Can you pay for the car in full? If not, how much can you afford for the downpayment and for monthly premiums? Some car financing deals trumpet huge savings in interest costs. Often, these savings are realized when you pay a large downpayment and amortize the loan over a shorter period . To illustrate, putting a 50% downpayment and paying off the loan in 12 months would save you more in interest costs compared to paying 10% for your downpayment and stretching payment terms to 4 years.
Determine if your monthly income and your cash flow would allow you to go for this type of financing option. Otherwise, look at the other payment options offered. Remember that financing decisions are always an individual matter based on one’s income, payment capacity, and other life circumstances. What works for one person may not be the best for the other.
2. Look at interest expenses.
After determining your monthly payment capacity, determine which of the financing deals will be applicable for your needs. Generally, a larger downpayment and a shorter repayment period means greater savings. Try to maximize your interest savings guided by this knowledge. Be ready to haggle – you’ll be surprised how some banks as well as dealers with in-house financing deals can be flexible with their rates and terms.
3. Consider maintenance and related costs.
Do not forget maintenance costs in projecting your car-related expenses. This would include tune-ups, oil changes, regular car checks, on top of your fuel expenses. Also take into consider yearly payments for insurance and car registration.
4. Take time to shop around.
Car dealers and banks both offer car financing packages. Check out what car dealers have to offer for the same car. You might be surprised to know that Dealer A’s package includes freebies that are not offered by Dealer B. Check out the interest rates being offered by banks as well as they can sometimes offer more competitive rates than car dealers.
5. Freebies count.
Ask your car dealer for free LTO registration, rust proofing, or even maintenance checks. You can realize a lot of savings from these freebies, which may not be given outright, but are actually available. However, do not let freebies be your sole guide. Look at these only after you have made the comparison of rates given by the different financing institutions.
6. Check out your employee benefits.
You might actually be entitled to a car plan or a car loan with generous terms from your company, or an interest rate subsidy. Often, the terms will be much softer than those available in the market. Check out if you are qualified for fleet financing as well.
7. Don’t forget insurance.
Don’t be put off by the cost of comprehensive insurance packages, since you don’t know when you will need it. Accidents happen, and so do acts of God (flash floods) that can ruin your car. Typically, if you are getting your car through a financing firm, you will be required to take out a comprehensive insurance plan for as long as the loan has not been paid. After you have completed your amortization plan, comprehensive insurance becomes optional.
8. Leasing.
If you are about to replace a car, do study leasing options. Although leasing is not very popular in the Philippines, it has its cost advantages for small businesses.
9. Remember fuel economy.
Your choice of car will be based on your individual needs, but do consider fuel-efficient models which consume less gas as opposed to gas guzzlers. Often, these cars have smaller engines, which may be ideal if you do not drive long distances or generally carry out your affairs within the city.
10. Look at the second hand market.
Cars quickly depreciate in value, losing as much as 20% or more of their value on the first year alone. There are many second hand cars available through banks, most of which have been foreclosed on and repossessed. You might be able to find some good deals from these. Before getting a second hand car, though, consider the state of the car and its mileage. Do not be afraid to consult professionals before making a decision.
source: www.abs-cbnnews.com
