Freebies To Avoid on Car Loans

It is common everywhere in the world for every festive season to be accompanied by fabulous car purchase offers. This trend is growing very fast in financial institutions that are busy rolling out attractive offers, discounts and freebies on car loans and car purchase in an attempt to woo their potential clients. For instance, most banks offer auto loans with interest rate discounts of about 1 percent as part of their marketing or promotional scheme. Such attractive offers and discounts have seen their actual sales increase tremendously in the past few years.

In most cases, offers, discounts and freebies provides you with a good degree of financial relieve even though there are no guarantees of the same. Unfortunately, majority people have not realized the financial implications that come with these financial incentives, especially freebies. As mentioned earlier, there is a plethora of freebies being offered by car manufacturers, car dealers and financiers. The following are some freebies that sometimes come with bad deals that may cost you more.

Free Servicing

This is one of the oldest tricks employed by a majority of car dealers who promise to offer you free car servicing beyond that which your manufacturer provides. While taking a personal car loan, this shouldn't be the premise of your judgement. It is very vital to note that there are some hidden costs associated with this freebie that will surely bleed your pocket dry. For instance, some financiers include cost of servicing in your car loan interest hence making you pay for such a service without your knowledge.

Free accessories

This is a common freebie that is offered to you by many financiers and dealers but it only comes with a particular type of car loan. Free accessories have hidden value but it's usually hard for you to realize because the cost of the auto loan repayment based on the stated interest rate in most cases is the only thing that arouses your interest. For instance, by providing you with a free accessory like a music system worth $5000, you may be wooed into taking the car loan with higher interest rates that may cost you double the price of the free accessory.

Free insurance

Many financiers and car dealers can promise you free insurance covers that last for up to one year. By checking on the insured's declared value (IDV), financiers find it easier to trick you by offering free insurance. Ideally, IDV should be should be close to the original price within the first one year and at least 15% less the following year. However, this is not the case with financiers who promise to offer free insurance upon car purchase.

Cash discount

In the long run, a number of cash discounts offered to you by car dealers or financiers might work out to be of financial benefit by substantially lowering rates at the time of purchase. Unfortunately, this discount is only availed to you on the down payment amount which you must make before availing the loan hence raising your car loan's interest rate in the long term.

Lower interest rates

Interest rates are usually calculated based on additional expenses and other fees along with EMIs paid. Financiers usually factor in these expenses while verifying the actual utility of the low interest rate. Unfortunately, this might make you end up paying more as you repay your car loan.