Do you need to improve your credit score?
It’s no secret that you credit score impacts your eligibility for getting a finance loan approved.This is because lenders have to consider the likelihood that the loan will be paid back during the contract’s length.
If you have a less than average credit score or a history of missing and making late finance repayments, a lender might refuse your application or offer you a higher interest rate to ensure that the initial loan is repaid as soon as possible.
Think about your budget
This is an important one. If you intend to borrow a loan in order to pay for a vehicle, you need to consider whether or not you’ll be able to make the repayments easily and readily.
While car finance can help you purchase vehicles that wouldn’t have otherwise been possible with cash, you’ll still be expected to pay back the loan plus interest for the duration of the contract which can range from 1 to 7 years.
Also, when it comes to making a car finance application you’ll be expected to put down a deposit that’s at least 10% of the car’s value. However, you can put down as large a deposit as you want and a larger deposit will decrease the amount you need to borrow in total.
Research current loan rates
Before you make any finance application, be sure to do market research to get an idea of the typical percentage APR rates that you’re likely to be offered. Select a variety of lenders and choose the one that has rates that suits you.
Is it better to finance a new or used car?
When it comes to financing a new car, it can be easier for the lender to provide you with value. Used cars on the other hand vary in condition, age, mileage etc. and lenders typically need to consider more when determining the value.
If you intend to pay off the finance loan and return the vehicle, then it could be worth financing a new car since you won’t have to worry about it depreciating in value later down the line. Car finance products like PCP and Personal Leasing would better suited to financing a new vehicle since you’ll be expected to return it once the contract ends.
But if you aim to own the car once the loan has been paid off, a used car purchased using hire purchase (HP) is the way to go. Used cars have already gone through significant depreciation prior to sold to you, so you won’t face a heavy loss in value should you decide to sell it on in the future.
Use the part exchange value as a finance deposit
A part exchange deal is a great way to sell and buy vehicles in one convenient transaction. So if you’ve found a dealership where you’d like to part exchange your car, it’s worth asking the dealership if you use the part ex value as deposit for the car you’d like to finance.