Are you currently searching for your own car? It can be hard to know which type of car finance is cheapest and how to get the best car finance deal possible. If you want to save money but also spread the cost with car finance, there are a few ways in which you can find car finance the smart way. The guide below explores how you can get a cheap car finance deal and put yourself in the best position when applying for car finance. It’s worth noting that guaranteed car finance isn’t actually possible, and you may need to pass a credit or affordability check before you can go ahead with car financing. With that said, let’s take a look at how to get the lowest car finance rate.
Increase your credit score
When you apply for car finance, you will usually have to undergo a credit check. Lenders use the information on your credit report to predict what type of borrower you will be. If you’ve missed payments in the past, have no credit history or have high levels of existing debt, you may find yourself with a bad credit score. Lenders tend to favour people with better credit scores as they are less of a risk to lend to. Usually, people with good credit scores have a long history of good credit management and can meet their repayment deadlines. Lenders can reserve the lowest interest rates for those with better credit and means you will pay less overall. Increasing your credit score in the run up to your finance application can help improve acceptance rates and lower your interest rate offered.
Know your affordability
Knowing how much you can afford to pay for car finance each month is really important. Many lenders may perform an affordability check to see how much you can comfortably afford. They take a look at your income and expenditure and see how much you could put towards a car. You can use a car finance calculator to see how much you could borrow based on your monthly budget and credit score and then shop for cars in your budget ahead of your application. This can help you get a realistic idea of which types of cars you could afford.
Choose a smaller loan
Opting to take out a smaller loan can help to reduce how much you pay overall. One of the cheapest ways to get a car is through PCP finance used cars which allows you to spread part of the cost of your chosen car. Used cars tend to be lower value which can help to reduce costs. PCP payments tend to be lower as you pay off the cost of depreciation instead of the value of the car. For many people, choosing PCP can mean they can get a newer car than they would with cash and pay for it in affordable monthly payments.
Save up for a deposit
If you want to get the car you want and don’t want to choose an older car, you could consider putting more down for your car finance deal. Having a deposit can show good financial management to potential lenders and can help you get accepted. Putting more down for finance means you reduce the loan amount and don’t have to borrow as much from a lender and can help to reduce your monthly payments.
Shop around for the best rates
Nowadays, there are so many places you can go to get finance. From personal loan supplied by banks to PCP agreements directly from the dealer, there’s many options to choose from! If you want to compare a number of lenders and don’t want to apply with multiple lenders, you could consider using a car finance brokers. Car finance brokers have access to a range of finance lenders and can compare packages on your behalf.
