What should you consider before applying for car finance?

Buying a car is one of the most expensive things anyone will pay for in their lives, so most cars are bought through some form of finance agreement. Along with the fact you have to choose the right car for you and your family, it’s important to know what you are getting yourself into before you sign an agreement. With that in mind, here is a list of the things you should consider before applying for car finance.

Take your time

According to The Independent, we spend up to six months shopping for a car, but only spend two hours deciding how to pay for it. Having a flashy new car is certainly a treat, but if you sign your contract without knowing if you make the repayments, you are setting yourself up for trouble.

Take your time when researching car finance deals. Though there are a number of finance options to go for; they’re not suitable for everyone. Make sure you know the types of finance options available to you before you get distracted by a shiny pair of new wheels.

Plan for the future

Though you may want a new sports model now, in three years time you may need a family car; it’s important to plan for the future as you don’t want to end up out of pocket.

Understand the different types of car finance

Do you know your HP from your PCP?

If you aren’t sure about the different types of car finance available then you are going to struggle to find the right deal for you. Being prepared, and knowing the difference between each type of car finance will make the decision much easier. The Car Expert has created a guide to the different car finance options including Hire Purchase (HP), Personal Contract Purchase (PCP) and Lease Purchase (LP).

What is the interest rate?

You would not believe how many people apply for car finance without understanding their interest rate, or knowing how much interest they are paying on the loan.

You may like the idea of low monthly repayments at first, but this kind of deal usually comes at a cost (with interest). If you decide to take out a long finance contract with lower monthly repayments you are likely to end up paying more for the car overall. It is far better to save money beforehand to put down a larger deposit and therefore reducing your monthly fees.

Should you apply for bad credit car finance?

If you have a low credit score you are going to find obtaining car finance difficult if you go through the usual lenders. If you know you have a bad credit score, it would benefit you to go straight to a bad credit car finance lender who will look at your application carefully and on an individual basis.

If you have missed payments in the past, have CCJs, have been made bankrupt, are unemployed, self employed or simply have no credit history you may not be granted finance unless you go to a specialist bad credit car finance lender. This type of lender will work with you on an individual basis to help you get car finance.

Are there any additional charges?

Before you agree to anything make sure you read through the entire contract, including any small print. If you don’t you could miss any additional charges.

Ensure you get all quotes in writing and make sure you understand all of the costs. You have the right to take the contract away and read it in your own time, so don’t let anyone pressure you into signing before you are ready. You are the one who will be paying, after all.

New car gift image by Shutterstock

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