There are so many benefits of getting a car on finance! You can spread the cost into monthly payments, usually get a better car than you first thought, and use your finance deal to improve your credit score! Car finance makes owning a car more accessible and splitting the payments up makes it an affordable option for many. But how can you save money on your car finance deal? Is there a way to lower your monthly payments? Let’s find out in the blog below.
Increase your credit score
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Car finance lenders will usually require you to pass a credit check upon application. Many lenders use a soft search credit check which doesn’t harm your credit score and only allows them to take a look at certain information on your file. Your credit history and ability to make repayments on time can determine if you are accepted for finance or not and also the rate you are offered. People with good credit scores tend to be offered better rates as they are seen as less of a risk to the lender. You can save money on your finance deal by increasing your credit score before you start applying.
Apply with someone else
You could spread the cost of car finance by applying for a joint car finance deal. A joint car finance application is when two people apply for finance on the same vehicle. This can be a good idea for a couple or family members who want to share a car and split the repayments. Within a joint finance deal, both parties are responsible for meeting the payment deadline each month. A joint car finance agreement can also work in your favor if you are struggling to get approved for finance because from a lender’s point of view, they essentially have more chance that the loan will be paid back.
Save up for a deposit
It may seem a bit contradicting that putting more money in for finance can save you money but it’s true! This way, you don’t have to borrow as much from a lender, and from their point of view, they don’t have to lend as much out. Having a deposit contribution can also indicate to lenders that you are good with your money. The bigger deposit you have can also reduce your interest rate offered which saves you money in the long run!
Explore different types of finance deals
There’s no car finance deal that is essentially cheaper than others, but car finance costs can depend on your budget, credit score, and deposit. In the UK, the three main types of car finance is hire purchase, personal loan, and personal contract purchase options. Personal loans can be more suited to those with good credit as they are offered by banks and building societies and can be harder to obtain with bad credit.
Hire purchase car finance can be good for those with low credit scores as the loan is secured against the vehicle. It can also be beneficial to people who want to essentially hire the car throughout the term and then own the car at the end. PCP car finance deals usually have lower monthly payments and have more flexibility at the end of the term, and you don’t have to keep the car.
Refinance your current term
If you already have a car in finance, you can save money by choosing to refinance your current loan. Choosing to refinance your car loan can have a number of benefits including lower monthly payments! Refinancing is when you replace your current car loan with another loan that usually has better terms. It is recommended that you wait until the halfway point of your finance deal before you refinance. It can help you to reduce monthly payments, reduce the interest rates, and short or lengthen your loan term.
Consider a car finance broker
Many drivers think that the best way to get a car finance deal is at a dealership but using a car finance broker can save you money! Car dealerships only have access to a limited number of lenders, but reputable car finance brokers have a wide finance panel. Brokers work by submitting your application on your behalf to a number of finance lenders, they then do the leg work for you and select the best deal from a range of finance packages. Many brokers don’t charge any fees either so the service is completely free to you!