5 Things To Consider Before Getting A Car on Finance
Car finance is a great way to spread the cost of getting a car! More drivers than ever are choosing finance as a way to fund their next car purchase and for many, it’s easy to see why. Whilst getting a car on finance can be an exciting time, there are a few factors that you should consider before getting a car on finance. This blog has been created to do exactly that and looks at how your budget, credit score and interest rates affect car financing costs and the ability to get approved. By taking a few simple steps before you start applying, you can help to increase approval rates and help you get a better deal.
1. Stick to your budget
When it comes to financing a car, your budget is really important. It can dictate which cars you can buy and how long you will need to pay your loan back. Car finance is a legal agreement and failing to stick to the rules of your credit agreement can lead to serious financial implications. Your budget should be realistic and affordable as it’s important that you can meet each and every payment on time and in full. If you’re unsure of how much to borrow, you can use a free online car finance payment calculator to get an idea of what your payments could look like.
2. Check your credit
Before you apply for any form of finance or credit, you should always check your credit first. When you do, you should make sure all your information is accurate and up to date and you can ask the agency who provided your credit report to make any necessary changes. If your credit score is a little on the low side, it can be a good idea to take some time to increase your credit score before you start applying. A lower credit score usually means you’ve missed payment sin the past or have high levels of debt and this increase the risk to the lender as you’re more likely to default on your car finance. By working on your score, you can show potential lenders that you can be trusted with your financial commitments and also get you a better interest rate.
3. Find the lowest rates
It can be possible to get a car on finance with no interest to pay but this is usually offered on new cars and may not be accessible to everyone. When shopping around for car finance, you should try to find a deal with the lowest APR possible. Your interest rate reflects the cost of borrowing and higher interest rate can make car financing more expensive than it needs to be. If you’re looking to get car finance with a low APR, it can be worth comparing different deals by different lenders and checking your eligibility for car finance first.
4. Compare both new and used car finance deals
Depending on the type of car finance agreement and your budget, you could get a better deal when comparing both new and used cars. For example, PCP car finance is a form of finance that defers much of the value of the car until the final balloon payment. This means that monthly payments tend to be lower, and you could get a brand-new car for your budget. However, if you wish to keep the car, you will need to pay the balloon payment at the end which can be expensive. Hire Purchase is good for used cars and bad credit applicants as the value of the car is divided into equal monthly payments with interest until the end of the agreed term. Once the agreement has ended, you will then be the legal owner of the car.
5. Use a car finance broker
Many drivers still think the best way to get a car on finance is by heading straight to the dealership or manufacturer. However, you could get a better deal by sorting your finance first with a car finance broker. Car finance brokers are essentially the middleman between you and the lender, and they have access to multiple lenders at once. This means they can help you find the best rate and cheapest car finance deal for your circumstances. They usually don’t charge a fee, but it can be worth checking first before you apply. You can then use your deal at any car dealership in the UK to get a car within your financial budget.