More drivers than ever are choosing to fund their next car purchase through finance. There are a number of reasons why drivers like car finance; you can get a newer better car than you would with cash, spreads the cost into monthly payments and choose a finance term that fits your circumstances. Economic factors such as new and used cars prices being high also mean that many drivers can’t afford to spend their savings on a car or get a vehicle with cash. If you think that car finance is the right choice for your next car or have made the wrong choice in the past when it comes to finance, the guide below has been designed to help you. It looks at the factors you should consider before you even start applying for finance and how to put your best foot forward.
Why should you prepare for a car finance application?
When you apply for car finance, it’s worth remembering that it’s never guaranteed, and you will need to meet the lenders criteria before you can get approved. Each lender you apply with will have a different criterion you need to meet but in general your credit score, affordability and personal circumstances may affect the approval process. This is why it can be good to prepare yourself for a car finance application to help increase the likelihood that you will get approved and also get the best car finance interest rate.
How to prepare before applying for car finance:
1. Check your credit report
The first thing you should do before you apply for any form of finance or credit is to check your credit report yourself. It’s important that all the information listed on your report is accurate and up to date. Having information that isn’t up to date can negatively impact your credit score. Lenders use your credit report when you apply for finance to assess the level of risk. If you have a low credit score, it can be harder to get approved for bad credit car finance as you probably have high levels of debt, have missed payments in the past or have never borrowed before. Usually the best finance rates are reserved for people with better credit as the risk to the lender is lower so it can be worth increasing your credit score before you start applying.
2. Work out your affordability
How much you can afford for car finance is really important and it’s worth considering before you even apply. Most lenders will require you to undergo an affordability check when you apply to see how much you could comfortably put forward each month. Your monthly budget can then determine how much you can borrow and also the cars within your budget. Your car finance budget should be realistic and affordable and it’s worth remembering that you will need to meet each repayment for a number of years.
3. Save for a deposit
If you need a car in a hurry and don’t have the money to hand, don’t worry. There are many new and used cars on finance with no deposit to pay and affordable payments but having a deposit can work in your favour. When you put more down at the start of your car finance deal it can help to reduce your loan amount, make monthly payments smaller or help you pay off your finance faster. A deposit can also be attractive to lenders as it can show good financial management.
4. Explore different cars
When you’re looking to get a car on finance it can be a good idea to have an open mind. Car finance is never guaranteed and having your heart set on your dream car may not sometimes work in your favour or be the most cost-effective option for you. There are many car finance options for both new and used cars and your choice may come down to your budget and personal preference. It can be worth comparing car finance deals on different types of cars to help you get the best rate possible and the vehicle that’s right for your needs.
5. Compare different lenders
Most drivers think the best way to finance a car is to head to the dealer and see what they can offer. This can be a good way to save time, but more drivers than ever are choosing to sort their finance first before getting the car they want. You can compare finance quotes online or use a car finance broker to help get you the best deal possible. Car finance brokers work on your behalf to compare some of the most trusted lenders in the UK and find the most suitable car finance package for your personal circumstances. You then have the freedom to get the car you want within your budget from any FCA approved dealer in the UK.