Are you interested in buying a new car? If so, you’ve probably found this article because you are considering paying for it on finance. It’s not hard to see why when you consider the exorbitant cost of vehicles in 2024. Finance is a great option because it allows you to get a car that’s out of your budget but still meets your needs. However, there are a few things you should know about before entering into a credit agreement with a lender. This post will tell you what they are, helping you to decide whether or not car financing is right for you. Keep reading to find out more:
Buying with Cash
The average person has nowhere near enough money to pay for their car outright. Financing presents people with the opportunity to buy themselves a car without settling for one that’s simply not suitable enough because it is all they can afford. However, if you can pay with cash, it’s worth considering. The only reason paying with cash is a good idea is because it will save you money on interest. Then again, if you can get a fair interest rate, it’s almost worth paying a little bit extra, since you won’t have to forfeit a chunk of your savings.
Credit Score
You need a good credit score to get a car out on finance. If your score isn’t great, take some time to build it first. A good way to build it is to pay back all credit card debts and register your property on the electoral roll. If you sign up for a credit check service, they will likely give you instructions and advice on what else you should do to increase your score. Make sure that when you're building your credit score, you're conscious of the fact that it can take a little while. Your score isn't going to improve overnight. If you need to get a car right away but your score isn't good enough for finance, you can get a guarantor to help you become eligible for a loan.
Buying Using Finance
Finance is a great way for you to buy a car you wouldn't otherwise be able to afford. When you consider how expensive cars have become, it is not hard to see why so many people are choosing to buy ones on finance. Buying a car on finance will save you a chunk of your savings and will make it possible for you to get something that would normally be out of budget. Whether it’s Nissan finance or finance with another brand, try to get it directly from the manufacturer. A good way to do this is to work with approved dealerships. An approved dealership is one that’s partnered with the manufacturer whose cars they are selling.
Using a Credit Card
Something else worth mentioning briefly is the use of credit cards. In order to get a car on finance, you are going to need to put down a deposit. The amount you have to commit to purchasing a new car as a deposit depends entirely on the vehicle’s price. Generally, though, you are asked to put around 5-10% of the purchase price in as a deposit. If you have a credit card, you can use that to pay the deposit. However, if using your credit card to pay your deposit isn’t possible, you could also take out a small loan. The smaller the loan, the less you’ll have to repay in interest.
Getting the Best Deals
If you are interested in buying a car using finance, you need to do everything you can to get yourself a good deal. The higher a lender’s interest rate is, the more you will have to pay back. You therefore need to conduct extensive online research and try to find dealers offering reasonable repayment rates. The current state of the economy means interest rates are a lot higher than they used to be. This is just something you're going to have to accept. You're not going to be able to get a massively reduced rate, no matter where you look. However, you can bring down the amount you have to pay back each month by putting down a larger deposit.
Saving Up for a Deposit
A deposit is a flexible sum paid to lenders before you take out a loan. It’s considered a good faith gesture, showing that you are committed to repaying. Most lenders ask for between 5-10% as a deposit. However, you can pay less if you want to. If you are interested in buying a new car, a large deposit will help you to reduce your monthly repayments. This is because the amount you paid as a deposit is knocked off from what you owe. For example, if the car you are buying costs $10,000, a deposit of $2,000 will mean you only need to repay $8,000, bringing your monthly repayments down considerably.
Trading Vehicle In
If you own a car already, you can usually trade it in as part of your finance agreement. This will knock money off of the amount that you owe. However, it is worth noting that if the car you are trading in is an old one, you aren’t going to get much money for it. Not all companies accept trade-ins, especially if the car you want to swap is in bad condition. Still, it’s worth asking. You can knock money off the total amount owed, saving you money each month.
Selling In the Future
If you are interested in getting a car on finance, you need to understand that until you pay the full amount you owe, the car actually belongs to the finance company. What that means is that if you decide you want to sell it in the future, you need their approval (unless the car’s paid off). Make sure that you do not just sell a car that’s owned by a finance company without their approval, as this can get you into trouble.
Car financing is a good way to buy more than your budget is allowing you to. If it’s something that interests you, conduct extensive online research and find the best lender you can. The better a lender is and the lower their rates are, the more pleasurable your experience will be.
