Understanding dealer finance

  05 June 2012

Last week the Daily Mail had a pop at its readers for taking out dealer finance when buying a new car.

The article claimed that cheaper borrowing was available elsewhere and said customers would often be better off taking out a personal loan to buy a car rather than opting for the dealer’s finance plan. The article seems to have been triggered by figures from the FLA showing increased use of dealer finance to buy new cars.

This missed the point of retailer finance options in quite a major way.
For starters, cheap personal loans are available only to those having the very best credit ratings. And the ‘strings’ often attached to such loans mean that, all things considered, they might not make the wisest choice – even if they look to be cheapest.

Dealer-supplied finance is usually secured against the car, which means there’s less risk in the lending so, for a lot of buyers, it’s the better option.

I’d suggest that rather than having a go at its readers, the Daily Mail should learn from them. Consumers are becoming ever more savvy and many will have researched thoroughly before buying, which is why the popularity of retailer finance is rising.

But then the Daily Mail does have a habit of saying house prices are up one moment and down the next. Maybe next week we’ll see headlines proclaiming the excellence of retailer finance options?

Tristan Young

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