Getting a car on finance is an easy way to make owning a car more affordable. There are different types of car finance available but in general, car finance allows you to spread the cost of your chosen car into affordable monthly repayments. You’ll also pay interest on top which is calculated by a number of factors such as credit score, deposit contribution and budget. Getting a finance deal that is affordable and realistic is important but how can you save money on a car loan? Let’s find out…
Increase your credit score
In general, people with better credit scores get access to better rates and can save money on things like car finance. For a finance lender, a better credit score shows that you have a strong history of meeting your repayment on time and in full. Getting accepted for bad credit car finance can be possible but you could get a better deal if you work on your credit score first. You can increase your current credit score by making your current payments on time and in full, reducing the amount of debt you have, registering on the electoral roll, lowering your credit utilisation rate and fixing any mistakes on your credit file.
Save up for a deposit
Many people search for car finance with no deposit contribution but having a deposit can actually be more beneficial for you. If you are planning on getting a car in the next few months, saving up for a down payment can help to save you money. The more money you put in means you don’t have to borrow as much from finance lenders. This can help to lower your monthly payments and also lower your interest rate offered. It provides the lender with mores security that you are good with your money and more than likely able to pay back your car finance.
Stick to your budget
A budget is very important when looking for and comparing car finance deals but also for your own financial benefit. Your car finance budget should be realistic and affordable. Not being able to pay back your car finance every month can lead to serious financial difficulties and affect your ability to get finance in the future. Financial experts recommend that you don’t spend more than 10% of your take-home pay on a car finance payment.
Refinance your current car finance deal
It’s also possible to save money if you already have a car on finance. Refinancing a car loan is when you replace your current agreement with a different one that usually has better terms. Refinancing a car loan can have a number of benefits such as reduce monthly payments, reduce interest rates, shorten or lengthen the loan term and improve relations with a lender! If you have a PCP car finance deal, you can also save money when you refinance balloon payment to keep your current car. However, it is recommended that you only try to refinance once you are halfway through your current finance deal.
Part-exchange your current car
Having a car to part exchange can be really beneficial and work well for a car finance agreement. You can use the value of your current car as a deposit for a car finance deal on a new car. Part exchanging is straightforward and means you don’t have to worry about selling the car yourself and the dealer can then sell the car for you. You can also part-exchange a car if it currently has outstanding finance on it. The dealer or lender would give you a valuation based on your cars current condition and compare it to the amount of finance secured against the vehicle. This then gives you the settlement figure for your deal. If the car is worth more than what you owe in finance, you can use the value as a deposit for a new car.