Getting a car on finance is a popular choice for drivers who wish to spread the cost. Buying a car outright with cash can be unrealistic for many and using finance can be attractive. Whilst a deal can’t be guaranteed to everyone who applies for car finance, many drivers turn to finance to make a new car more affordable. There are many car finance agreements to choose from and not doing your research first could make financing a car more expensive than it needs to be. Read our top 5 tips below to finding the cheapest car finance deal possible.
Get the lowest interest rate possible
Many drivers get carried away with solely focusing on the monthly payment for car finance. Yes, low payments may be attractive but they may also come with higher interest rates. A higher interest rate can make the overall loan amount much more expensive than advertised. It’s worth checking the full agreement rather than just the monthly amount. When shopping around for car finance, you should compare loans with low interest rates to ensure you’re getting the best deal possible.
Save for a deposit
Some car agreements do require you to put down a deposit at the start of the deal so it’s worth checking beforehand. When you put down a deposit for a car, you are lowering the loan amount. So, say you want to borrow £10,000 and you put down a £2,000 deposit, your new loan amount will be £8,000. This will then be split over the term which can decrease your monthly payment and make your car finance more affordable. It can also help to lower your interest rate offered because you aren’t having to borrow as much from the lender. Lenders do tend to favour those with a deposit to put down as it shows good financial security.
Use a car finance broker
It is highly recommended you search around for the best car finance deal possible. However, with hundreds of UK car finance companies to choose from, it may seem like a minefield! When you make multiple applications for car finance with different lenders, your credit score could take a hit. Protect your credit score and find the best deal possible by using a car finance broker to help you. A car finance broker acts as a middleman between the customer and lender and has multiple lenders on their panel. The broker helps the customer to find the best deal with the lowest interest offered. They are usually free to use and instead charge the lender a commission if the customer takes out finance with them.
Improve your credit score
Your credit score is very influential not only on the likelihood of getting a car finance approval but also the rate you may be offered. A low credit score can make it harder to get a car on finance because you are seen as more of a risk, based on your previous history of borrowing. You could get approved with low credit but lenders tend to save their best deals for those with string credit files as they are less likely to default. You should always check your credit before any finance application to see where you fall on the credit scale. Where possible, you should work to improve your credit score to help put you in a better credit position.
Choose a shorter loan term
When you’re searching around for car finance deals, you’ll notice you can change your loan term to suit your monthly payment. A longer loan term will reduce your month payments as you are spreading the loan over a longer period. This may seem attractive, but you’ll usually also notice a longer loan term increases how much interest you pay. Lenders want to get their money back as fast as possible and choosing a longer loan term could make your finance more expensive. You should try to choose the shortest loan term possible for your budget to help make your next car finance deal as cheap as possible.
