Over 90% of new cars are bought with car finance. The figures are considerably lower for second-hand cars, but nevertheless, the car finance market is considerable.
Car finance allows you to spread the cost of your next vehicle into affordable monthly payments till the end of your chosen term. Car finance can’t be guaranteed to everyone and there are a few personal factors that will affect your ability to borrow money for a car.
Many drivers aren’t aware of how easy finance mistakes can make car loans more expensive than they need to be. UK Car Finance, a reputable finance broker looks at the most common mistakes customers make even before they start to apply for finance.
Heading straight to the dealership
A common mistake drivers make when buying their next car is heading straight to the dealership. Whilst it can be a fast and efficient way to sort your finance, you may be limited to the lenders that the dealership uses. Instead, you could compare car finance deals UK by using a car finance broker. Brokers work on behalf of the customers to match them with the best and cheapest finance package from a wide range of different lenders.
Not setting a budget and sticking to it
Buying a car can be an exciting prospect and it’s easy to get carried away with additional options, features or even the latest model! However, if you set your finance budget too high and start to struggle to keep up with the payment, you can risk losing the car. You could use a free car loan payment calculator before you even apply to see how much you could borrow based on your monthly budget and loan term length. The monthly budget you set should be affordable each and every month and you should also think about the additional costs that come with owning a car such as fuel, insurance, and car tax rates.
Not checking your credit score before you apply
Your credit score is an important factor in lenders deciding if they want to offer you finance or not. Based on your previous history of borrowing money, future lenders can make predictions about how you’re going to handle their finance. Many customers can under or overestimate their credit score and don’t even check it before they apply. You should get into the habit of tracking your credit score and if your score is low, you should work on your score in the lead up to a car loan. Your credit score can affect the likelihood of approval and also the interest rate you are offered. Usually, people with higher credit scores get access to the lowest finance rates and makes loans cheaper.
Choosing the wrong car finance agreement
You’d be surprised how many drivers aren’t aware of the different ways you can buy a car. In the UK, there are 3 finance agreements to choose from, they are a personal loan, hire purchase and personal contract purchase options. It can be worthwhile to take some time to explore each agreement in more detail to see which is right for your circumstances. Some agreements include joint responsibility if there is a fault or problem with the vehicle, which can be a massive help if something does go wrong. Choosing the wrong agreement could be costing you more than it needs to.
Not saving for a deposit
A deposit for car finance can often be overlooked. Don’t get us wrong, there are plenty of 0% deposit options to choose from but having some money to put down at the start of your agreement can be beneficial. A higher loan amount can be subsided by the amount you put down as a deposit. Your deposit can then help to make the loan amount smaller and reduce the monthly payments.