Car finance is now one of the most popular ways to fund a car purchase. For drivers, there are so many benefits to using finance. From getting a newer, better car for your money to spreading the cost into monthly payments that suit you, it’s no wonder that more drivers than ever are choosing finance! However, if you’ve never had a car on finance before, you may be wondering what the common car finance mistakes are and how to avoid them. The guide below looks at how you can get the best deal for your circumstances and the biggest myths surrounding car finance.
1. Only focusing on the monthly payment
When you get a car on finance you can pay for your chosen vehicle in monthly instalments till the end of an agreed term. Your car finance agreement payments will depend on a few factors such as loan amount, credit score and interest rate. Many drivers get too obsessed with focusing on the lowest car finance monthly payments possible. However, the cheapest monthly payments don’t always mean you are getting the best deal for your circumstances. Where possible, you should instead focus on the loan term length. A longer loan term can seem attractive as it lowers the monthly payments but spreading the cost means you are taking longer to pay back your loan and also means you pay more back in interest. You should always try to opt for the shortest loan term possible and which fits into your budget.
2. Not having a deposit to put down
It can be possible to get a car on finance with no deposit and if you need a car in a hurry, you may not have time to save for a deposit. However, having a deposit to put down at the start of your agreement can be really beneficial. Your car finance is calculated on your loan amount and then split into equal payments with interest. Putting more in for a deposit means you are offsetting the cost and helps to reduce how much you need to borrow. This can then make your monthly payments cheaper and even in some cases, reduce how much you need to pay back in interest.
3. Not checking your credit score first
Before you apply for any form of finance or credit you should always check your credit first. Your credit score can affect your car finance approval and also the rate you are offered. If you’re unsure, you can use a free car finance check to see where you fall on the credit scale without harm your score. If you find your score is on the lower side of the scale, it can be good to take some time to increase your score before you start applying for finance.
4. Not sticking to your set budget
When you apply for car finance, you will be asked how much you can afford to pay each month. Your car finance budget is really important and it’s essential that its realistic and affordable. If you fail to meet the repayment schedule of your finance deal it can have serious consequences. If you don’t pay, the lender can take the car off you if it’s a secured loan and it can also seriously affect your ability to borrow money in the future.
5. Buying the first car you see
When it comes to searching for cars on finance UK, you shouldn’t jump at the first car you see. It can be an exciting time when you’re looking for a car and tempting to rush into the first car that you see. However, in order to get the best deal possible, it’s worth taking your time to explore different car finance agreements and also different types of cars within your budget. If there are a few cars you like, it’s always best to take test drives to see which you like best. A car that may fit in your budget may not be the best drive or after closer inspection, may not be the right one for you. Take your time with the car finance process and don’t feel pressured into making a decision if you’re not ready.
