Everything You Need to Know About Financing Your Next Car

Everything You Need to Know About Financing Your Next Car

Financing is a popular option for people whose budgets do not permit them to buy expensive cars outright. It involves paying on credit, breaking the cost of a vehicle down into more affordable monthly installments. Interest is always charged on top, however. If you are interested in financing a car, there are a few things that you need to know. Educating yourself about these things will help you get a better deal and understand what financing is all about. This post will explore this topic in more detail and tell you everything you need to know.

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Everything You Need to Know About Financing Your Next Car

Buying from Main Dealers

If you are interested in buying a car on finance, the first thing you need to know is that in order to get yourself a good deal, buy from the main dealers. A main dealer is a dealer who’s partnered with a particular manufacturer, like Shaw GMC is with GMC. The good thing about main dealers is that because they are connected to car manufacturers, they can offer much better deals than other dealers can.

This means you can get cashback on finance over a certain amount, lower interest rates, and promotional offers. Even though main dealers are a lot better than private ones, still take time to read your chosen dealer’s reviews. A dealer’s reviews will tell you everything you need to know about them and make it a lot easier for you to decide whether or not you want to buy a car from them.

Consider Interest Rates

The next thing that you need to think about is interest rates. Interest is charged on top of finance deals, so lenders can make giving loans worthwhile. The higher a loan’s interest rate is, the more you are going to have to repay. If you are interested in buying a car on finance, your priority should be finding one with a fair interest rate.

Try to avoid lenders that overcharge people. Lenders openly advertise the interest rates they charge, so you should not have a hard time figuring out how much you are going to have to pay. Use an interest calculator once you know the rate so you can get a better idea about what your monthly repayments are going to be.

Knowing Potential Risks

Once you have considered interest rates, you need to think about the risks of borrowing money and using it to pay for a car. Borrowing money that you cannot afford to repay is very irresponsible. The consequences of defaulting on a car finance agreement can be devastating. One of them is that you will receive a default on your credit score.

A default will prevent you from being able to obtain a credit card or loan again for at least six years. Defaults can also lead to repossession orders being made. If a repossession order is made, repo men will turn up at your house and take your belongings to reclaim the lender’s money.

Everything You Need to Know About Financing Your Next Car

Checking Your Credit Score

If you want to get a car in finance, you need to check your credit score. When you make an application for finance, the first thing lenders are going to do is to check your credit score. Checking your own credit score before you make an application will make it easier for you to determine whether or not you’re going to be accepted.

Making an application for finance when you have a bad credit score isn’t a good idea, because hard searches cause your score to drop. If it’s already low, a hard search could cause it to fall significantly. Make sure you have a good enough score to take a loan out before making an application for credit.

Raising a Deposit

If you want to make a car finance application, you’re going to need a deposit. The amount you have to pay as a deposit depends on the lender. Some lenders ask for larger deposits than others do. As a general rule, it is good to have at least 10% of the purchase price of your new vehicle saved up as a deposit. Having a large deposit brings down the amount of money you ultimately have to repay, and will reduce the interest you owe.

Finally, make sure you are in a good enough position to make repayments on time. Missing payments can have a very negative impact on your life, as mentioned previously. If you cannot make repayments on time, you’ll lose your deposit and your vehicle.

Are you planning on buying a new car in finance? If so, you need to think about the things mentioned here. Giving consideration to the guidance given in this post will make your life a lot easier and simplify the process of buying a car on credit.

Some images from Depositphotos

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