Car finance is one of the most popular ways for drivers to fund their next car purchase. Car finance comes in a number of different forms and can be tailored to your budget. The cost of both new and used car buying has increased in recent years and it can be hard for drivers to save up one lump sum to buy a car. This is where car finance comes into play and it can help drivers to get a car but pay for it over an affordable term. Car finance can’t be guaranteed to everyone who applies as it would be irresponsible for a lender to accept someone who can’t afford to pay their finance back. Before you can get a car on finance, you will need to meet the lenders criteria first. Below are some of the top reasons why getting a car on finance could be beneficial to you.
1. Get a better, newer car.
When you get a car on finance, you can usually get a newer, better car than you would be able to afford if you were paying with cash alone. If you wanted a £10k car, it could take a long time to save up for one but car finance could mean you get a £20k with low monthly payments on PCP. You could even get a brand-new car and spread the cost into affordable monthly payments. Buying a newer car can improve the safety and reliability of your vehicle too.
2. Spread the cost to suit you.
One of the biggest benefits of taking out car finance is being able to spread the cost of a car into payments that suit you. A car loan calculator can be used to see how your monthly budget, loan term, and credit score can affect how much you could borrow. Tailoring your car finance to suit your situation makes managing your finances easier and helps you manage your cash flow. Typically, car finance deals are spread over 2-5 years and you can choose the term to suit your budget. You may notice when using the car loan calculator, your monthly payment will reduce when you lengthen the loan term but it can mean you pay more in interest.
3. Improve your credit score.
When you first take out a car finance deal, you may notice your credit score increases. This is because one of the factors which affect your credit score is how much debt you owe. Taking on more credit can negatively impact your credit score and it may take a knock. However, once you start to make your repayments on time and in full, your credit score should return to normal. By meeting all your monthly payments on your car finance deal and any other credit you owe, you can sue your deal to improve your credit score and show future lenders you can handle car finance responsibly.
4. You don’t need a deposit.
There are some car finance deals which may require you to put a deposit down at the start of the agreement. There are many benefits of having a deposit for car finance and it could even help you get approved by a lender. Whatever money you put down at the start of the deal comes off the loan amount and helps to make your deal more affordable. However, most lenders have now made car finance deals available with no deposit to pay. This means if you don’t have the money to hand or don’t want to empty your savings, you don’t have to!
5. More flexibility.
The beauty of car finance is that there are different forms and you can choose a deal to suit your needs. Car finance is really flexible and offers drivers the choice of how they own and pay for a car. There are a number of car finance deals to choose from and you may be eligible for one finance deal over others. Car finance deals like Personal Contract Purchase offers low payments and lots of flexibility at the end of the deal. You can choose to pay the balloon payment and keep the car, hand the car back to the dealer or use the value of the car towards another car on PCP.
Conclusion
Financing your next car can be a smart move for several reasons. It allows you to get a newer, better car without needing to save up a huge amount of cash. You can spread the cost over a period that suits your budget, making it easier to manage your finances. Plus, making regular payments on time can improve your credit score. Many finance deals don’t require a deposit, so you can keep your savings intact. With various flexible options available, you can choose a plan that works best for your needs, whether you want to eventually own the car or trade it in for a new one. Overall, car finance makes getting a car more affordable and convenient.