Buying a new car is one of the biggest financial investments you will probably ever make. Car finance makes owning your own car more affordable and splits the cost into monthly payments. This allows you to spread the cost of a newer car than you probably first thought you could get! Getting car finance doesn’t have to be stressful though. If you’ve never had a car loan before then you may be unsure of which finance deal is right for you. Save yourself time and hassle with these common car loan mistakes and how to avoid them.
Assuming You Will Get Approved
Getting a car loan is really exciting but you should never assume that you will get approved for finance. Typically, having a good credit score will increase your chances of getting a car loan but if you do have bad credit then it may be a little harder. There are many bad credit car finance specialists who can help people get car finance with bad credit. If you already know that you have bad credit then you could consider improving your credit score before you start applying for finance. This can increase your chances of getting approved and also enable you to get lower interest rates which can reduce your monthly payments.
Choosing Your Car First
Shopping around for your next car is the exciting part but don’t get too hung up on a very specific car. If you fall in love with a car that you can’t afford to make your repayments on then the car finance company can take the car away from you if you fail to meet the repayment schedule. Choosing a finance deal like hire purchase means that the loan is secured against the car and the lender has the right to take the car away if you don’t pay.
Heading Straight To The Dealership
Sorting your finance at a dealership can be really easy and efficient but it’s not the only option you have available to you. Using a car finance broker to help sort your finance for you can be really beneficial. Car finance brokers work with a range of car finance lenders so they can help you get accepted with the most suitable lender for you. You only need to apply online once with your details and then they can help you get matched up with the lender with the best deal for your circumstances. This can also be beneficial if you have bad credit too!
Focus On The Monthly Payments
Low monthly payments can be really tempting however, opting for the lowest monthly payments could mean a longer finance term or that you pay more overall. Paying over a longer period can increase the amount that interest you pay. If you are looking to negotiate your car loan, then you should negotiate the overall cost rather than the monthly payment.
Work Out Your Budget Beforehand
Whilst you are considering your car finance monthly price you should also work out your monthly car loan budget. A car loan is a legal financial agreement so you should make sure that you can definitely afford to meet your repayment schedule each month. Continuing to miss payments can drastically harm your credit score and you could stand to lose the car too. When budgeting for your car loan, you should also take into account what you will pay in running costs and other requirements such as car insurance, breakdown cover, vehicle tax rates, MOT and servicing, fuel costs, and any unexpected repair costs along the way.
Not Asking Enough Questions
If you’re taking out a car loan at a dealership or using a broker, you should make sure that you fully understand everything before signing on the dotted line. Ask your car finance expert as many questions as you need, do your research into different types of finance available and brush up on any car finance jargon that you don’t understand.
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