Why now is a good time to brush up on dos and don’ts of financing your car

Now the flurry of activity has gone out of the 192-reg period, it’s a good time to get your motoring finances in perspective – for two reasons.

Firstly, there are still serious bargains out there that, with your finance primed, could yield a good new-car deal.

Second, there is nothing like planning now for a 2020-reg in January over the coming months.

If you know your finances, you increase the chances of a better deal.

So here are key tips on what to do and know:

■ Work out how much you can afford and want to spend before you start. It can be tempting to increase budget when you start test driving. Just decide how much you want to pay and stick to it;

■ Don’t focus entirely on the monthly repayment amounts when comparing different finance deals. Hire purchase or a personal loan will have higher monthly repayments than a PCP. Why? Because a large proportion of the cost is deferred to the end of a PCP term. So focus on the overall cost, including any balloon payment at the end;

■ Do your homework before you get to the garage. Compare your finance options. Go to ccpc.ie to get independent information on the different types of finance. If you are thinking about getting finance through a garage, do your research beforehand to ensure you know what you are signing up to – and that it’s the best option for you;

■ Factor in whether you want to own your car ultimately. This will help you decide what finance option suits you best. A loan from your bank or credit union means you own your car once you hand over the money. With hire purchase and PCP finance you don’t own the vehicle until the final payment;

■ Don’t sign up to a PCP contract without considering what you intend to do at the end of the contract. There will be three options: hand back the keys and pay no more money, pay the lump sum to own the car or trade it as part of a new-car deal. Your intentions at the end of the contract are vitally important. If you intend buying it outright at the end, you may need to save up the lump sum. If you intend using whatever equity is in it against a new car you will need to keep to mileage limits and ensure agreed-standard maintenance;

■ Ask the dealer to explain any conditions attached to a finance product. Make sure you understand all aspects: when you will own the car and what happens if you miss a payment? If you are opting for a PCP there can be restrictions on mileage etc so consider these in deciding whether such a package is right for you;

■ All types of finance will be considered by lenders if you want to borrow.

If you have a PCP agreement you may be paying low monthly repayments with no intention of paying the final lump sum, but a lender will consider the entire cost of the agreement, including the lump sum payment at the end.

If you miss repayments on any credit agreement, including car finance, this may affect your ability to borrow in future.

As ever, you need to do your sums and be sure you can afford to run the car. As well as repayments do factor in tax, insurance, fuel and servicing.

Áine Carroll, director of communications and policy, Competition and Consumer Protection Commission contributed major sections of this advice.

Irish Independent