Getting a new car on finance can be a really exciting time. Especially as spreading the cost of your finance means that you can get a better car than you probably first thought! Whether you’re buying a new or used car, there are many finance options available with different types of finance packages. There are many common car finance mistakes that many consumers make, and we want to help you avoid falling into common car loan pitfalls.
Not checking and improving your credit first
Whilst it’s not impossible to get accepted for car finance with bad credit, you can get a better finance deal by improving your credit score first. Car finance lenders check your credit score before accepting you for finance to make sure you can be trusted to pay back their proposed finance. They sue the information on your credit score such as payment history to determine what type of borrower you will be. Having a good credit score can also give you access to better interest rates and monthly payments. One of the easiest ways to increase your credit score is to pay any of your debt or bills on time and in full. You should also consider paying off some of your debt first if you have high levels.
Work out your car budget first
Many people make the common mistake of thinking that a car finance is all about the lowest monthly payment, this can be true but there are also other key costs associated with getting a car on finance. The general maintenance and cost of running a car should be included in your monthly budget. There’s no point in getting a car on finance if you can’t afford to run it. You will need to consider the cost of fuel, congestion charges, breakdown cover, road tax, car insurance, servicing and MOT costs and any unexpected damage charges.
Choosing the lowest monthly payment
As mentioned above, getting a car on finance with the lowest monthly payment may seem like the cheapest way to afford your next car. However, this isn’t always the case. For any car loan you will be required to pay back interest on top of your finance agreement. The longer you choose to pay back your finance agreement, the more interest you will pay overall. And opting for a shorter term can also decrease the rate of interest offered. If possible, you should try and pay off your finance in the shorted time with a comfortable monthly payment for you. You should always remember to only borrow what you can afford to pay back.
Sort your finance first and get the car you want
Many people make the mistake of heading straight to the dealership to get a new car. But what if you sorted your finance first before you choose the car you want? You could consider using a car finance broker. Car loan brokers are essentially the middleman between you and the finance lender. You apply online with a reputable car finance broker such as Refused Car Finance and they put your application in front of a wide range of lenders for free! They match you up with the most suitable lender with the best finance deal for you. You can then take your car finance deal to any car dealership that is verified by the Financial Conduct Authority and get a car within your budget!