Not many people have the available funds to go out and buy their next car with cash, so the next best thing that most folks go for is car finance. In a nutshell, car finance is a loan that is secured against the car, and once all of your monthly installments have been made, you own the car outright.
Car finance is typically easier to obtain than personal loans because the loan is being secured against the car, so if you fail to make your payments then the car finance firm are within their rights to demand immediate payment of the arrears, or they can seize the car; this is known as a repossession.
There are all sorts of different car finance deals available to consumers, depending on their individual circumstances. But is there a way of bagging yourself the best finance deal? Actually, yes there is! Here are some top tips to help you do so.
Although as I mentioned earlier, car finance is typically easier to obtain than an unsecured loan, your track record with credit is one of the factors that finance companies look into before they decide to lend you the money to buy your car.
If you are self-employed, bankrupt or have enough debt to give a small third-world country a run for its money, then you probably shouldn’t be buying a car on finance right now. In such cases, I would strongly recommend buying a cheap banger car and saving up some money each month to buy a better car outright.
But if you haven’t been careless with your past finances and you are in regular employment, getting a car on finance shouldn’t be a problem for you. Still, it’s best to obtain a copy of your credit file so that you can establish how good (or bad) your credit risk is.
Some people are tempted to take on cars on a lease agreement (usually a brand new car or a nearly-new model). Car leases are similar to straight finance agreements, except that at the end of the term you typically have to hand the car back, or pay a large final settlement fee; something that is often referred to as a “balloon figure”.
Lease agreements are more suited for those who only want to have the use of a car for say 2 or 3 years, but if you intend on buying a car and keeping it, cars on finance are a much better bet as the cost of your loan is spread out over a fixed term, and there is nothing more to pay when you reach the end of the agreement.
One of the best ways of keeping your monthly finance costs down is to raise as much cash upfront as possible for the purchase of your next car. You can do this via a number of ways, such as selling your existing car privately, doing some overtime at work, selling unwanted items at home, etc.