Getting a car in finance is a simple way to spread the cost of owning your next car. You make affordable monthly payments, usually with added interest, to an agreed term.
But how can you ensure you get the right car loan for you?
Can you reduce how much you spend on monthly payments? Several key factors affect the rate at which lenders will offer you. Let’s find out.
Increase Your Credit Score
Generally, the better credit score you have, the better rate you will be offered. People with good credit usually have a strong history of making repayments on time and in full, which is attractive to potential lenders.
Being offered a lower interest rate will reduce the amount of interest rate you will pay overall and can save you money. Having a better credit score can also give you access to higher loan amounts to get a better car and lower monthly payments. If you can, you should try to improve your credit record before you apply for car finance.
Take Out Finance Together
You could soften the blow of a finance deal by taking out a joint car finance deal with a partner or family member. A joint car loan is when two people apply for finance on the same vehicle. Both parties are then legally responsible for meeting the repayment deadline.
A joint car finance deal can also help you get approved for finance if you have poor credit. From the lender’s point of view, they have more security that the loan will be paid back and could mean easier acceptance for the applicant.
Refinance Your Current Finance Deal
If you already have a car on finance and you want to reduce your car finance payment, you could consider refinancing. Refinancing a car loan is when you replace your current finance agreement on the existing car with a new finance deal.
Usually, the new deal is a better rate or lower monthly payments. It is recommended that you wait until at least halfway through your current car finance deal before you consider refinancing though. You can use your existing deal to make repayments on time and in full to build your credit and then benefit from better terms.
You May Read: When is the Right Time to Refinance?
Put Down a Deposit
It may seem counterintuitive to save up for a car loan when you want to spread the cost. However, having more money to put into your finance deal can help to reduce your monthly payments. A deposit is also seen as more favourable by lenders as it means you don’t have to borrow as much from them.
Use a Car Finance Broker
Traditionally, you would sort your car finance at a dealership when you have seen the car you want to buy. But what if you sorted your finance deal before you got your car? Car finance brokers work by comparing a massive range of finance lenders on your behalf.
This way you can get the best car finance deal with the lowest monthly payments without having to do the leg work! Making multiple applications for car loans in a short space of time can harm your credit score but you only need to apply once with a broker.
You can then take your car finance deal to any FCA approved dealership in the UK and get the car you want!
Part Exchange Your Current Car
Having a car-to-part exchange when looking for car finance can help to reduce your costs. Lenders will provide you with a valuation amount for your current car which you can use as a deposit for your car finance deal. Part exchanging saves you the hassle of selling your car and also provides the lender or dealer with a car that they can then sell.
If your current car already has existing finance, you can contact your finance lender for a settlement figure to pay it off. The settlement figure would then be deducted from your vehicle’s valuation amount.