When you are considering replacing your old car and buying a new one, the biggest issue the majority of people face is how you will finance the new vehicle. The fact is that many people don’t have the money available to buy a car outright, so they have to think about getting finance. However, before you apply, there are a few things you need to understand, or you could make a costly mistake. Below are four useful tips to help you avoid the most common car finance mistakes.
Check Your Credit Report
Before you think about anything else, you need to check your credit report. There are a vast variety of different things that can affect your credit score, such as applying for loans, even if you aren’t accepted, so be sure that your score is in good condition before you start. You can get a copy of your credit file sent to you, and you should read it carefully. Ensure that all the information on it is correct and that nothing is on there that shouldn’t be. Once you have checked your file, you are ready to move to the next step.
Know What You Can Afford
Hopefully, you will have a good idea what your finances are like, but if you don’t, you need to ensure that you have a budget in place before you start looking for cars. It is unwise to start looking at cars if you aren’t sure you can afford the repayments. You can then also tailor your search to the maximum price you can afford which will avoid future financial problems.
Choosing the Right Finance Company
Once you have worked out how much realistically you can afford towards your new car, you need to see how you will get the finance. You need to check out the finance companies carefully, so you know what they are offering you. Not all companies will be the same; some might not even be registered or have any form of legal backup should things go wrong! By finding a reputable car finance company, you will be protecting yourself from any unwanted problems later.
Take the Shortest Loan Possible
Many people make the mistake of choosing the longest possible repayment structure when applying for finance. However, even though the repayments will be lower, the car you bought won’t be worth anywhere near what you paid for it when the loan is paid off completely. It means if you intend to sell the car and get a newer one after the loan is paid, you won’t get a lot of money towards the next car. Even though your repayments will be higher, choose the option that will give you more money to play with later, and it will get the loan paid off quicker.
It is important that you do your homework when thinking about buying a car, whether it is used or new. If you can have a figure in place and the finance worked out before you start looking, you will make your decision easier when it comes finding the right car.