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Figure out best overall finance deal for you

PUBLISHED: 06:44 10 July 2014

Interesting advice: Simon Gray of Credo Asset Finance.

Interesting advice: Simon Gray of Credo Asset Finance.

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Simon Gray, of Credo Asset Finance, says figure out the whole finance package not just the monthly payment.

Payment, payment, payment – what’s it going to cost me per month?

Well, how about asking a different question – how much are the interest charges?

So here’s a couple of examples on the same car which costs £22,000 and, with a £2,000 deposit, has you borrowing £20,000.

One – 48 months at £311.22 per month with a guaranteed future value of £9,573.80

Two – 36 months at £429.71 per month with a future value of £7,500.

Now budgets may dictate that we go for option one – it’s £118 per month cheaper after all. But which is better value?

Firstly, simply multiply the payments out – this gives option one repayments of £24,512.36 against £22,969.56 in option two – now which is better value?

Also the APR on option one is 8.1% against 7.5% in option two.

Now which one would you prefer?

The moral of the story is never be flattered just by the monthly payment – look at the finance package as a whole, look at the total you pay, look at the APR.

I would always suggest you pay up to your total budget, not below it. The more you pay per month – assuming the underlying rate is the same – the less finance charges you’ll pay. This will also impact on the equity you will have in your car when, and if, you settle early. And that will impact on the payments you make, or the car you can afford, when you come to change next time.

Sometimes, I’ll be first to agree, if your budget in this example is £315, then option one is probably the only deal you could do – and you’re getting into it for the right amount per month – but if not consider things in more detail.

If in doubt speak to a good, independent finance broker who can do all the maths for you and hopefully direct you to the deal that best suits you and your circumstances.

Credo Asset Finance is at 85 Yarmouth Road, Norwich, NR7 0HF. Phone 01603 703180, email sales@credoassetfinance.com, log on to the website at

www.credoassetfinance.com. Twitter: @CredoFinance, Facebook: www.facebook.com/#!/CredoAssetFinance

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