This is a collaborative post.
If you’re in the market for a new car, you may be wondering what the best way to fund it is. More drivers than ever are choosing to finance a car and if you’ve never had finance before you may be wondering if it’s right for you. The price of new and used cars is at an all-time high and even opting for a used car can set you back thousands of pounds. There are so many benefits to financing a car but just like any form of finance or credit, it may not be suited to everyone. The guide below has been designed to help you decide whether car finance is the best way to fund your next car purchase and the factors you should consider first.
Spread the cost
The main benefit of getting a car on finance is the ability to spread the cost into payments that suit you. You set your car finance budget, which should be realist and affordable and then choose to pay it back over a term that suits you. Most car finance agreements can be taken over 3-5 years, depending on which agreement you choose. If you’re not sure how much you can afford for finance, you could use a free car finance calculator to find out how much you could borrow for car finance.
No down payment
When car finance was first introduced, you usually had to put down a deposit of around 10% of the cars value. However, there are many cars on finance with no deposit needed at the start of the deal. This can help make it more affordable if you need a car in a hurry and don’t have a deposit to hand. If you do have some savings to put towards car finance, it can be beneficial as it reduces how much you need to borrow from the lender and can lower your loan amount. A smaller loan can reduce your monthly payments or means you can finance it over a shorter term.
Get a better, newer car
Many drivers like car finance as it allows you to get a newer and better car than you could when buying with cash alone. Both new and used cars can be bought on finance and deals such as PCP benefit from lower monthly payments even on new cars as they defer most of the cost till the final optional balloon payment if you wish to keep the car. It can be much safer for yourself and your passengers to get a newer car with better safety features rather than an old used car that you don’t know the history of.
Check your credit score. When it comes to any form of credit or finance, your credit report is really important. Your report and score can indicate how well you’ve handled your borrowing in the past and also if you’ve had any previous credit history. When you make missed or late repaymetns, ledners can be worried that you are lielly to default on their loans based on your past behaviour. The best car finance rates are also reserved for those with better credit socres so it can be worth increasing your credit before you starts applying to help