Are you a first-time car buyer? Looking for car finance? Have you been burned by the wrong car finance in the past? Whatever the reason for your car finance anxiety, let us help you get the best deal possible! Car finance doesn’t need to be stressful but it can be if you’re not prepared. We recommend looking at the below 5 factors BEFORE you start shopping around to help make sure not only you can afford a car on finance but also that you get a deal that’s right for your situation.
1. Know your affordability
Before you make any kind of purchase, the first place you should always start is with your budget. Car finance is especially important because if you haven’t set your budget correctly and find it hard to keep up with repayments, the car could be taken away from you and it has a huge impact on your ability to borrow in the future. Set a realistic budget for every monthly payment. Your monthly payments are usually fixed, but it can be worth checking with the lender first as some may change over the course of the agreement. When you start shopping for a car finance deal, set a max budget, and stick to it. Dealers are great at squeezing every last penny out of you so make sure you stay strong and don’t stray from what you can actually afford for a car. You’ll also need to consider whether you’ll you putting down a deposit or choosing a 0 deposit car finance deal.
2. Know your credit score
Your credit score is the second most important aspect when getting a car on finance. Your credit score can affect how much you can borrow, the interest rate you could be offered and also the number of lenders willing to lend to you. A low credit score makes it harder to get approved for finance as you are seen as more of a risk to the lender. If you do get a car loan with a low credit score, you could face a loan with a higher rate of interest. The best car finance deals are usually offered to people with ‘excellent’ or even ‘good’ credit histories as a reward for their good financial behaviour. If you’re not sure where you fall on the credit scale, check your credit report before taking out finance and improve your score where possible.
3. Know which car finance deal is right for you
Did you know there are actually 3 different ways you can finance a car? In the UK, the 3 most popular ways to buy a car is through a Personal Loan, a Hire Purchase agreement or a Personal Contract purchase deal. Each deal is different and you may be eligible one form of finance over other. For example, personal loans tend to be the most cost-effective way to get a car because they offer low rates of interest. However, you may struggle to get a personal loan with low credit. Hp could be more bad credit friendly though, as it is secured loan, which means the lender owns the car during the agreement and can take the car off you if you fail to repay. PCP is best for low monthly payments and the flexibility to change car more often. Look into each agreement in more detail to see which is best for you.
4. Know your requirements
Take the stress out of car buying by knowing what you need from your next car before you head to the dealership. Considering personal requirements such as how many seats you need, which features are most important to you and which fuel type is best can help you to get the right car for your situation. At this point, it can also be a good idea to consider different makes and models which could suit you. Take a look at their current market value to make sure you’re not getting ripped off by the dealer and research any common problems associated with certain makes and models.
5. Know your car finance jargon
Even if you’re new to car finance or you feel like a seasoned pro, you may not be up to date with your car finance jargon. Things like APR or Total Amount Payable will all be included in your car finance contract and knowing what they mean can put you one step ahead. Try having a quick search of common car finance jargon to make sure you’re fully aware of what your agreement means. If you’re unsure of any wording, make sure to ask the dealership to explain and ensure you’re making an informed decision.
