Many drivers are relying on finance to fund their next vehicle. Car finance is a popular choice for drivers because it allows you to spread the cost of your next car into affordable monthly payments. Car loans can be very cost effective but there are things you can be doing that are making your finance more expensive than it needs to be. The cost of your finance will be affected by a few factors so follow our 8-step guide below to getting cheaper car finance.
Buy a used car.
Used cars are a great choice for your next car. There’s a huge range of availability, they’re cheaper than new cars and they depreciate at a slower rate. Usually, car finance deals are calculated by the loan amount and any interest. The loan amount will be reflected by the car’s value so choosing a cheaper car can make your finance deal more affordable.
Improve your credit score.
If you’ve got bad credit, you may already know it can make your finance deals more expensive or you may even be refused a car loan due to bad credit. Car finance lenders give the best deals to people with strong credit histories because based on their previous history of borrowing, they are less likely to default on their future loans. Missed payments, late payments, defaults, bankruptcies can all put lenders off and leave you with a bad credit score. Take some time to improve your credit situation before you apply for finance to help you get a better deal in the future.
Save for a bigger deposit.
Just like we’ve mentioned above, your car finance will be calculated on your loan amount. When you put down a deposit for finance, it is deducted from your loan amount and makes the loan smaller. This in turn helps to make your finance deal cheaper. There is many car finance with no deposit deals but if you can, it is recommended you put down a deposit to help make your deal more affordable.
Use a finance broker.
Shopping around for the best car finance deal is the easiest way to get the cheapest possible option. However, it can be time consuming. Why not let a car finance broker do the leg work on your behalf? A car finance broker works just like a finance broker and instead of applying directly with the lender, the broker helps you to find the best and cheapest deal from the lenders on their panel.
Choose a low-interest rate deal.
There are many advantages of getting a 0% interest car finance deal but most finance deals will come with some form of interest to pay. A higher interest rate can make financing a car more expensive than it should be. When searching for finance or using a car finance broker, try choose the deal with the lowest rate of interest possible. Don’t solely focus on the monthly payment as it could mean you pay more interest than other options.
Choose a shorter term length.
When you apply for finance, you’ll be asked how much you can afford to pay each month and how long you’d like to pay it over. Choosing a longer loan term spreads the cost further and makes your monthly payments cheaper. However, it can also increaseyour interest rate and can make your finance more expensive overall. You should always choose the shortest loan term possible for your budget to avoid excess interest charges.
Get a car with low running costs.
Buying and owning a car are wo different things. Getting the cheapest car finance possible is the first step but choosing a car which is cheap to run will help make life more affordable. You will need to pay for fuel costs or the cost to refuel an EV and choosing the wrong car can be expensive. You’ll also need to factor in the cost of car insurance, road tax and servicing and MOT costs too. All of which can soon add up so make sure you’re factoring running costs into your budget too.
Refinance your car loan.
If you already have a car on finance and want to make your current deal cheaper, you could consider refinancing your current loan. Before you do so, it’s recommended you refinanceif you are more than halfway through your agreement or have paid more than 50% of the value. Any time before this may not be very beneficial. Refinancing is when you pay off your current finance and replace it with a new one. Usually, your new loan will have better terms e.g. a lower interest rate or cheaper monthly payments.
