Thinking about buying a new car on finance? The wide rage of finance deals can be confusing, so I’ve compiled a handy guide of things to consider when choosing a car finance deal.
Take time to shop around for the best deal
With so many deals around, you may be tempted to take the first one you come across, but if you want to get the best possible deal it is worth taking the time to do some research.
Look at the APR (Annual Percentage Rate) interest rate of each deal and look closely at the total cost of borrowing. Remember that the longer the repayment period, to the higher the overall cost of borrowing will be.
Only borrow what you can afford to pay back
Some people make the mistake of seeing a loan as ‘free money’ and buy a car that they cannot afford. Make sure you can afford to pay back your monthly re-payments by deciding on a budget before you start applying. It may be tempting to buy a better model, but if you cannot afford the monthly repayments you will soon come to regret it. Far better to pay a larger deposit to make the monthly payments smaller and to keep the overall cost down than to stretch yourself and struggle to pay the bills.
Avoid buying PPI
You will have undoubtedly heard of the recent scandal regarding miss-sold payment protection insurance (PPI). If you’re not sure what it is, PPI covers your car finance payments if you are suddenly unable to work due to sickness or you become unemployed. The issue with PPI is that it is expensive and does not cover everyone. If you are self employed or have a long-term sickness condition, for example, PPI will probably not pay out.
Along with PPI, you may be offered GAP insurance, which pays out if the car is written-off in an accident. GAP insurance is also expensive and cover can be limited, so it is best to avoid these.
Watch out for additional charges
When you apply for car finance, make sure you are 100 per cent sure what you will be paying to avoid any hidden charges. Read the small print and ensure you understand any extra costs that you could incur by making repayments early or by going over the agreed mileage.
Check your credit score
Your credit score will determine what finance deal you can be offered, and the better the score, the better your deal will be. By checking your credit score before applying for finance, you can make sure you are getting the right deal.
If you have a bad credit score, then you can still get car finance through bad credit car finance companies such as Clearway Car Finance. As long as you can make the repayments, these types of lenders will give you a loan even if you have a bad credit history, so it is worth going straight to this kind of lender if you are worried you will be rejected by others. Remember, when you apply for finance it leaves an imprint on your credit history. Clearway Car Finance will only perform a ‘soft search’ so it cannot be seen by other lenders.
By taking the time to research finance deals, determining your budget early and knowing your credit score, the process of applying for car finance will be an easy ride.
Featured Post
