Is Car Finance Worth It?
Buying a car on finance is one of the most common ways for first time car owners to buy their car. There are lots of types of loan available, and interest rates are currently much better, making finance an attractive option. Despite the popularity, you should still do your homework first and go in informed.
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Where Do You Want To Buy Your Car?
Where you’re planning to your car will make a difference to what finance options you have. Manufacturers and dealerships like Liverpool Car Centre may offer finance deals like hire purchase, leasing or personal contract purchase. Usually, these deals are only available on new cars, but check with used car dealerships near you, as they may also offer finance options.
Do You Want To Own Your Car?
Your finance choice will make a difference to car ownership. If you take out a personal loan to pay for a new car, then you will own your car yourself from day one.
Leasing means you only rent the car over an extended period, but some deals will offer you the option to buy the car when the lease period ends. If you go for a hire purchase plan, you will make monthly payments in order to become the car’s owner at the end of loan period. Until the loan is paid off, you don’t own the car.
With the PCP option, you can make a lump sum payment at the end of the term to buy the car, or you can take out a new PCP loan on a totally different car, and return the original one. This could be a choice if you like to have a new car model.
Can You Afford It?
With most car financing options, you will need to have some money to put down as a lump sum as an initial deposit. The size of this payment will vary from deal to deal, so do some research to find out how much you will need to save up.
Nearly all car finance plans rely on you making set monthly payments. If you don’t have a steady, stable income that you can rely on, you will need to access whether monthly payments are right for your budget. If you miss a payment it’s likely that you will get charged a late payment fee, incur multiple fees and you could quickly see your debt spiralling out of control. Make sure to save up an emergency fund if this is something that worries you.
Your credit rating will also affect the amount you pay for car finance. If you have a poor rating, you won’t have access to the top deals and you’re likely to be faced with more expensive interest charges. See some of the ways you can improve your credit score to help you gain access to the better deals.
Do You Actually Need A Car?
Car use is dropping in a lot of urban areas, with younger people instead opting to use public transport. Before committing to buying a car, think about how much you actually need to use one. If you have a long commute, live in a remote area or don’t live somewhere with great public transport, then buying a car will be worth the money.
Buying a car on finance, as long as you do your research, can help to spread out the upfront cost of buying a car, making it a great option for first time car owners. Just make sure you can afford the deposit and the monthly payments before you commit.