Buying a used car using car finance isn't as straightforward as it sounds Because, depending upon the deal you secure, when you add in the cost of the finance you could end up paying a lot more. You could even end up paying double the cost!
Take a quick browse around the internet and you'll see that there are plenty of deals available to finance the purchase of your car. High street banks and building societies are all willing to offer loans to buy cars, but they play it very safe when it comes to lending so unless you have an excellent credit score or an established customer record with them you'll struggle to get approval for a loan.
For those whose credit record is less than perfect there are a number of used car dealers who offer finance as well as selling the cars. If you want to hold on to the car for at least three or four years, then this is a reasonable way of buying one. However, if you plan to exchange it in the short term, this is not the best option for you.
The length of time that you plan to keep hold of the car is very important when it comes to considering finance. You need to check your loan agreement for any early settlement penalties. Some lenders can charge up to three months interest for early settlement, so if you only keep the car for six months you'll end up paying for nine months interest!
In fact deciding how long you want to keep your car should be the first thing you consider. You should certainly not be tempted into taking a five year loan to pay for a car that you will only keep for two years, or you will need to settle the loan before you trade up.
Plan realistically about how much you can afford to pay each month, bearing in mind you still have to live and also pay for car insurance, road fund licence, fuel, maintenance, such as tyres and exhausts, and possible repair costs. Many people stretch themselves to the limit on the finance and can't adequately fund the used of their car!
The most important tip on car finance is; shop around. Find out how much the finance will cost you, but crucially without making an application. This is very important as any application made will involve a search of your credit record. The more recent searches you have on your credit record, the less likely you are to have a good score. Lenders will assume that you are desperate for finance and therefore consider you a higher risk. You can ask most lenders for an illustration of how much the car finance would cost, without them searching your credit record. There are even websites on which you can search a massive number of lenders offering car finance sites using your personal credit information and without leaving a search footprint on your credit record!
If you do your homework, accurately assess how long you intend to keep the car, realistically calculate how much you can afford to pay each month and shop around, you'll be in a better position to get the most suitable finance for your circumstances.
