When interest rates and the cost-of-living rise in the UK, it can make it much more expensive to get a car on finance than it previously has been. If you need a car in a hurry but don’t want to pay more than you need to, it can be good to consider a few factors first. There are a number of things that can make your car finance cheaper and it can be worth being prepared before you start making applications for finance. It’s always worth remembering that car finance is never guaranteed though and you will need to meet the lenders criteria before you can receive a car finance approval.
Improve your credit score.
If you have a low credit score, you may have already struggled with getting an approval from finance lenders. But having a low score can also make your car finance deal more expensive as you will usually be offered a higher interest rate. Lenders tend to save their best rates for people who are less likely to default on their loan, based on their past behaviours. Lenders can check your financial history through a credit check and see how good you are at managing your money. A higher interest rate means you pay back more interest overall and can make borrowing more expensive. Before you start applying for finance, you should try to increase your credit score first.
Part exchange your car.
If you currently have a car, it can be a great idea to part exchange your car when you buy a new one as it can help you to save money. When you part exchange your car, you can use its valuation price towards the cost of your new car. Part exchanging is a great way to help reduce the cost of your next car finance deal, especially if you don’t have a deposit to hand.
Put down a larger deposit.
Car finance deals such as hire purchase benefit from higher deposits at the start of the agreement because it helps to reduce the loan amount. By putting more down at the start of your deal, you are reducing how much you need to borrow from the lender. A lower loan amount can equate to smaller monthly payments and also a lower interest rate which helps to save you money. If you don’t have a deposit to hand though, you can still get affordable deals with no deposit needed.
Shop for the lowest interest rate.
Interest rates reflect the cost of borrowing and choosing a higher interest rate can make car finance more expensive. It can be a good idea to shop around for the lowest interest rate offered or calculate car finance loans first. Choosing a longer loan term can decrease your monthly payments but means you will end up paying interest for longer and it may not work out as cost-effective in the end. If you don’t want to make multiple car finance applications with different lenders, you could instead use car finance broker who has access to a number of enders. Brokers can then help you select the lowest car finance interest rate for your circumstances.
Refinance your loan.
If you’ve already got a car on finance and want to lower your car finance payments, you could consider refinancing your current loan. Once you’re halfway through your current agreement, you could find a lender who will refinance your loan to help get a better deal and a better rate. You can choose to lower your monthly payments, get a lower interest rate, or extend the loan term to help make your monthly payments cheaper.