Questions to Ask Before Signing a Car Finance Agreement
Car finance agreements can be tricky to navigate if you're not familiar with all of the terminology or you don't fully understand what each different type of finance means or requires of you. And all too often, the exact details you need to know are buried really far into the paperwork; you might not see them initially or at all until it's too late.
If you don't want to get caught out like this, here are a few questions you can ask before signing a car finance agreement that can uncover some details you need to know upfront.
What’s The Total Cost, Not Just the Monthly Payment
You need to know more than just how much will be coming out of your bank account each month. A lower monthly payment can be hiding things like interest fees and the length of a contract that might not become apparent until you've agreed to the deal and it's too late. Always ask if the low payment or the monthly payment you've been quoted includes everything, or if you need to expect additional figures to be added to this.
On top of this, stretching out the agreement over a longer term can lower the monthly payment, but it can also increase the total interest paid across the life of the agreement, meaning you're paying more over the duration of the payment term than you would by accepting a higher monthly cost.
What Happens at the End of the Agreement
Some finance agreements end with buyers owning the vehicle outright, while others require a final lump sum payment if you want to keep the vehicle and not hand it back over and walk away.
These structures can vary by lender and by agreement type, and it's not always as obvious as maybe it should be at first glance. Let's say you're looking at a deal like a seat arona pcp, this will have its own specific end-of-term terms, so it's worth asking upfront before you agree to take on this type of agreement so you know what happens at the end, and you're not caught unaware once things draw to a close.
Are There Mileage or Usage Limits
Some contracts will have mileage caps on them for the length of the contact and if you exceed these, you will incur additional charges. These limits can catch you out if your circumstances change or you don't actually estimate correctly regarding how much you'll be driving each year. Ask about the mileage allowance if applicable and then the cost per mile for going over it as well as the option to change your limits and how much this would be if you need to change things before the agreement ends so you're not left with a huge bill at the end.
What Fees Apply for Early Cancellation or Repayment
Life circumstances change, and it might be that you need or want to pay off the agreement early or get out of it altogether. You never know what will happen in the future, but you can check what exactly will happen if either of these scenarios comes to fruition. Many agreements include fees for both of these options, and the amount will vary significantly depending on the lender and how far into your agreement you are. Understand the fees upfront and how they will impact you if life circumstances dictate you need to choose one of these two options so you're prepared.
