How to avoid hidden fees when getting a car loan
So, you’ve found your dream car. The next step is to secure financing. You might think that the most important numbers to take note of are the interest rates that you’ll need to repay over the next few years, but the truth of the matter is that borrowing money to purchase a vehicle can come with all sorts of hidden fees. Avoiding these surprises is critical if you want to save money and get the very best deal on your car. In this article we’re going to break down a few of the most common fees that buyers are likely to encounter.
Hidden fees from dealer financing
Some of the most common hidden fees that you’ll encounter with a car loan are the ones that come directly from the dealer. While it might seem enticing to secure your loan from the same place that you’re purchasing your car, these loans usually won’t offer you as good a deal as you’d get from elsewhere. There are a couple of ways that dealer financing can drive up costs and introduce hidden fees. The first way is that the interest rate itself may be significantly higher than what you’d get from another lender.
On the other side of the coin, some dealerships offer loans with very low interest rates. While this can certainly be tempting, the result is that you’ll usually have to pay what’s known as a ‘balloon payment’ at the end of the term. This can be as much as a few thousand dollars, and is taken off the initial purchase price. If you aren’t able to pay this at the end of the loan term, you most likely will have to enter into another loan, accruing even more interest until the full amount has been paid off.
Upfront car loan fees
Other types of hidden fees common with car loans are the ones that need to be paid before you even purchase your vehicle. These upfront fees are usually bundled in with the signing up process, and are often a requirement for loans that offer very low interest rates. However, if you’re not getting the very best interest rate possible, then you may not need to pay a fee.
Beyond Bank’s No Fee Car Loan has absolutely no upfront, ongoing or early repayment fees. Despite this, the loan still offers a competitive, fixed interest rate of 8.89 per cent. This type of loan is ideal for buyers who simply want to get on the road without having to worry about any additional costs now or in the future.
Hidden fees later in the process
Of course, not all hidden car loan fees come at the start of the process. The most common type is a monthly service fee, and even if this is as low as $5 per month, over the five year loan that adds up to $300. It may not seem like a huge amount, but with so many fantastic car loans available without these extra costs, there’s no point signing up for anything that requires you to pay extra unless you’re getting a very low interest rate in return.
Another common form of extra costs that you may encounter are fees or penalties for paying off your loan early. This means that if you want to make extra payments and reduce the effects of compounding interest, you’ll have to pay for the privilege.
Here at Beyond Bank, we believe in providing the very best for our customers. That’s why we offer a range of car loans designed to suit budgets and circumstances. To find out more, contact us today.