In the market for a new set of wheels? Here are our top tips to remember when you apply for a car loan.
1. Be realistic when you choose your vehicle. While you might be able to get a loan for that very nippy brand new little red sports car you’ve always dreamed of, if you are buying your first car or a family car, it’s best to be realistic. A little red convertible is not very practical as a family vehicle, and if this is your first car (and you’re on your first job), you’d probably be better off with something small, economical and probably second-hand. However, if you’re hunting for a second car for fun, then you can indulge your dreams a little.
2. The more you can pay up-front, the less you have to borrow and the less interest you will have to pay. Deals involving a zero deposits look very attractive, but you will end up paying more in the long run. Saving up a little before you buy a car is wise for this reason and for another reason: if you have to wait a bit, you are less likely to be impulsive and get the wrong vehicle for your needs.
3. Plan your budget: before you sign on the dotted line for a car loan, make sure that you will be able to meet the monthly repayments. For many people, this may be the first time they actually set a budget. Don’t forget to leave a buffer just in case of an emergency.
4. Larger payments over a shorter period or smaller payments over a longer period? A shorter term for the loan means that you pay less interest, but your budget will be committed more heavily with less room to move. However, lower payments over a longer term may be more easily fitted into an existing budget, especially if you’re forced into buying a new car to get to and from work.
5. Ask if you are able to make additional payments on top of your regular repayments so you can pay your loan off more quickly. Some finance companies allow you to do this without any penalty. Meanwhile, others have an early repayment fee. If the company that offers the best deal does charge an early payment fee, do the maths. Is the fee lower than the interest you would have otherwise paid?
6. Don’t just buy the first car you see that fits your requirements. Shop around, do your research and do your homework. Consider all aspects of your purchase, including running costs, as well as the number of seats and the size of the car. Also think about what happens when repairs become necessary, as those costs can add up quickly.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.