Buying a car can be a significant financial investment and you could benefit from taking out finance to fund this purchase. Car finance is widely available and there are many different products that offer a range of different benefits. Car finance options can include taking out personal loans from banks or building societies, borrowing money against a mortgage or taking out credit agreements directly from the dealer. Not all of these options will be suitable for everyone, so you do need to do your research, get some loan advice and think carefully about which finance product is best for your needs.
Budget
You should think very carefully before taking out any new credit products. You will need to consider any other loans, credit cards or agreements you have outstanding and make sure your budget can cover all of your necessary repayments. Before you decide what car you would like, sit down and write out a list of your incomings and outgoings. Plan your monthly budget carefully so that you have enough money to meet all of your bills and needs. This will help you to understand just how much money you can realistically afford to pay back on a car loan. You may not be able to afford to borrow enough money to get the car of your dreams, but in most cases, with a little careful planning you should be able to borrow a sensible amount (subject to underwriting) that will get you a good, solid car that will last you for years.
Loan Term
When you take out loans for car finance you may be offered a choice of loan terms. Basically, the more you can afford to pay back each month on your loan the less interest you will pay overall. This is because you are paying the loan off in a shorter amount of time. If you can afford to pay more off each month then you should opt for the shortest term loan you can afford. However, if your budget is a bit tight, then a longer term loan could be a more suitable option. The monthly repayments will be lower, which means it will take longer to pay off the loan. Although you will pay a bit more in interest, these lower repayments should be easier to manage.
Deposits
If you are thinking about taking out car finance, then one of the ways in which you can cut the costs of borrowing is to save up for a deposit. With many car finance options such as Hire Purchase (HP) and Personal Contract Plans (PCP) the more money you can put in yourself the lower the monthly repayments will be.
