So, you’ve found the car you want but how do you secure the finance deal that’s right for you? More drivers than ever are deciding to lease or finance their next car. Knowing if you’re getting a good deal or not can be difficult but there are a few simple steps to take to assure you get the most suitable finance agreement for your circumstances.
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Having a budget for car finance is really important. Your finance budget should be realistic and affordable as it’s crucial that you can meet your repayments on time and in full. Failing to do so can result in the car being taken off you and affect your ability to get approved in the future. You should take into account how much you can afford to pay and also the length of your loan term. Lenders may also require you to complete an affordability check so they can see how much you can afford based on your incomings and outgoings and determine your maximum lend.
2.Compare types of finance
There are 3 main types of car finance agreements in the UK that tend to be the most popular, they are but are not limited to a hire purchase option, personal loan agreement and Personal Contract Purchase car finance. You may be more suited to a type of car finance agreement than others depending on your personal circumstances. For example, if you have a low credit score, you may not be eligible for a personal loan as they are usually provided by banks to people with good credit history. PCP car financecan be good for people who want more flexibility, low monthly payments and aren’t as interested in owning the car at the end. Hire purchase can be a good option for people who want to essentially hire the car throughout the term and then once the final payment has been made, they become the legal owner.
3.Shop around for interest rates
Interest rates are really important when it comes to car financing. The amount of interest you pay will be determined by a number of factors such as length of loan, deposit contribution, credit score, value of your chosen car but also will vary from lender to lender. That’s why it’s important that you shop around for low interest rate car finance. The interest you pay is usually included in your monthly repayments so you can compare deals offered by different lenders easily.
4.Work on your credit score
As mentioned above, having a better credit score can reduce your interest rate offered and it can also help you get approved for car finance. If your credit score is low, it’s a good idea to consider rebuilding your credit score before you start applying. You should try to reduce any current debt you owe first, don’t take out any new credit, keep your credit utilisation low and make all your current payments on time and in full.
5.Save up for a deposit
In order to get a better finance deal, it can be beneficial to have a deposit to put down for finance. A finance deposit means you don’t have to borrow as much from the lender and can reduce your monthly payments and interest rate offered. A deposit contribution can also indicate to lenders that you are good with your money and can improve acceptance rates.
6. Part exchanges your current vehicle
Using your current vehicle as a part exchange can help you to get money off your finance deal. Dealers or lenders can use the value of your current car towards your new car. If the car is worth enough, it can help to recue your monthly payments too. This also saves you the hassle of having to sell your current car and you can hand it to the dealer when you pick your new car!