admin October 17, 2012 No Comments

According to the financial whizzes, the global recession is officially over. However, most of us are likely to tell the whizzes to go and pull the other one, as a lot of us are still having to tighten our belts and all rest of it to make our dollars stretch further  which is one of the reasons you’re probably considering taking out a loan to buy your next car rather than paying for it outright. Who’s got the money for a new car just lying around, anyway?

However, don’t think that a loan is the answer to all your money problems when times are tight. Even though a loan seems like a simple solution, you could end up getting yourself into a worse mess than you started with, especially if you don’t do your homework.

At least if you’re considering taking out a car loan, you’re sticking to the first rule of financial common sense when it comes to loans. This first rule is that you should never borrow money, not even a small amount, to purchase consumables or things that won’t last. Loans should be applied for only for larger things that are likely to last a long time and have some sort of retail value. A car (and, for that matter, a motorbike or a boat) certainly falls into that category. Think about it like this: if things turn to custard, you can at least sell the car to pay off the amount outstanding on the loan. (We’re talking here about loans you apply for rather than smaller credit card stuff. While it’s not a good idea to buy your groceries or pay for a family outing using a credit card as a general principle, this is a bit of a grey area, especially if the purchase involves online shopping where a credit card is a bit of a must  but that’s another story.)

Secondly, you need to keep your head on when it comes to choosing a car. Sure, it’s possible to get out a loan to buy some flash sports car as your one and only set of wheels, but common sense should tell you that champagne on a beer budget (or Alfa Romeos on a Toyota budget) are a bad idea. Don’t forget that you still will have to pay back that loan, and the longer the loan is running for, the more interest you end up paying. Choose a car that suits your needs and your budget  and don’t forget to factor fuel and other running costs into the equation.

Equations are part of the third good principle: set a budget and work out what you can afford. Get out the calculator or fire up a spreadsheet on the computer and use this to work out the weekly repayments that suit your needs and lifestyle best. Don’t forget to leave a small margin in this weekly budget for emergencies and unexpected things rather than planning things down to the last cent. This budget information will be really helpful when you come to talk to us, as it gives us an idea of the sort of weekly repayments you can manage, and we can help you find something that suits.

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