Dealership and/or manufacturer finance
Car dealer and manufacturer finance offers can be simple and cost effective, but do the mathsCar dealerships, whether they are selling new, demo or used cars, often present car finance options to buyers. It is a key part of their business and a service offered by almost every dealership.
Dealerships can offer a range of finance options, from simple car loans to more structured novated lease arrangements that include all the vehicle running costs.
In the case of new and demo vehicles, often the car finance is linked to a manufacturer’s own finance company. There can be special offers linked to particular vehicles or promotions which can be attractive in terms of value for money.
Special dealer finance offers can be used to introduce new vehicles and also as runout incentives when a model is soon to be replaced. They are also sometimes offered with selected used cars via programs with labels like ‘Certified Pre-owned’.
In almost all of these cases, the dealer is acting as a reseller of the finance and is making a margin on the finance. However, due to increased consumer regulation and the competitive nature of car retailing, that doesn’t always mean the buyer ends up paying more. The dealer’s margin may in fact be paid by the manufacturer.
Dealer finance offers can sometimes make it hard to understand exactly what you are paying for your new car and for your finance. There are many moving pieces: the price of the car, interest rate, loan term, fees; and also whether it is a conventional loan or a loan with a large final balloon payment. Trade-ins are another complication, although that applies with any type of finance.
There are upsides, however. It is in the dealer’s interest to try and get you a finance deal you are happy with – even if you have a less-than-perfect credit history. And manufacturer-backed finance providers can offer very competitive rates.
The flipside is you will have to fully understand the offer – or take the riskier approach of trusting the dealer that the finance deal is the best for you (and not the one that earns the dealer the highest margin). And with convenience comes the chance you will pay a little more…
Related: Car Finance - Everything you need to know
Related: Specialist auto finance providers (including brokers)
Related: Leasing and commercial finance options
Related: Car loan and finance terms and definitions
Related: How do I finance my car
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