Financing a used car is a great way spread the cost of owning your next car into affordable monthly repayments. Used cars have a lower purchase price than newer cars so you can get a really good deal on many used cars. Don’t get us wrong though, there are many cowboys in the finance industry and if you’ve never taken out finance before you may be worried that you’re being taken for a ride. Let’s take a look at the best way to get a good finance deal on a used car and where to get it!
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Improve Your Credit Score
If you have a good credit score, it’s always worth checking your credit score before you start applying for finance. You should make sure all your information is accurate and up to date and look out for any inconsistencies in your credit applications. Applications for finance that you did not perform yourself can mean that you are victim of fraudulent applications in your name and can harm your credit score. If you are applying for bad credit car finance and are worried about getting approved for finance, there are a few ways in which you can increase your chances of getting approved.
1. Make All Your Payments On Time
The easiest way to increase your credit score is to show good financial responsibility. You can do this by meeting your repayment schedule each month for any existing bills or credit you have. If you have a credit card, you should try to pay it off as soon as you can and not just pay off the minimum amount due either. If you don’t have any credit yet, you can use something as small as paying a phone landline or getting a mobile phone contract and paying it off each month.
2. Check For Any Financial Links
If you’ve taken out credit in the past with someone else for example a joint car finance deal, you will then become financially linked on your credit file. If you no longer have any active credit with someone who has a bad credit score, it can be best to ask your credit referencing company to dissociate yourself from them. Their negative credit score can also impact yours.
3. Reduce High Levels Of Debt
If you already have high levels of existing debt, lenders may be hesitant to lend you anymore. If you can, you should try to pay off more of your debt than apply for more credit or finance.
4. Keep Your Credit Utilisation Low
Your credit utilisation is how much of your credit you use. It is recommended that you use below 50% of your credit limit and if you want to really push your score further you should only use around 30%. For example, if your credit limit is £1000 on a credit card, you should only use around £300 of that.
Save Up For A Deposit
If you want to really impress finance lenders, you could also consider saving up for a deposit. If you have bad credit, it can show good financial responsibility to lenders too. Even saving up for a few months to put together a deposit can help you. Putting more money in for finance also reduces the amount you will need to borrow. In some cases, it can also lower the APR offered, reducing the amount of interest you will pay overall.
Use A Car Finance Broker
Many people only think the best way to finance your next used car is at a dealership. However, sorting your financer first through a car finance broker can be convenient, fast and save you money. A car finance broker handles your application and then matches you up with the most suitable finance deal from a wide range of car finance lenders. You don’t have to waste time shopping around as they do all the leg work for you! You can then take your finance deal to any FCA approved dealership across the UK to get the car you want.
Research Different Type Of Car Finance
Much to many drivers’ surprise, there isn’t just on size first all finance packages. There are a few different ways which you can finance your next car. The most popular car finance deals in the UK include a personal loan option, Hire Purchase car finance and Personal Contract Purchase.
If you get accepted, a personal loan gives you the full amount to buy a car and own the car from the start. You would apply for how much you want to borrow and if approved you get the full amount deposited into your bank account, sometimes the very same day. You then make monthly payments to a fixed term with added interest. You can sue your personal loan to get the car you want from a dealer or private sale.
Hire purchase car finance is a type of car loan that is secured against the car until the end of the term. This means that the finance company own the car until the very last payment is made. After that, you will be the automatic owner of the car. If you fail to meet your repayment schedule, the car finance company do have the right to take the car off you so it’s important you can pay your loan back. You can apply for a hire purchase deal online or using a car finance broker. You sort the finance first and then get the car you want and make monthly repayments with interest till the end of the term.
Personal Contract Purchase (PCP) deals are similar to a Hire purchase deal but there are a couple of things you should note. PCP deals tend to have lower monthly payments because you aren’t paying off the full amount of the car, this suits many people with a lower budget for finance. At the end of the agreement, you have three options, you can either hand the car back to the dealer, use the resale value for another PCP deal on a different car or pay the resale value or balloon payment yourself and keep the car. You don’t own the car unless you pay the balloon payment, and it will more than likely be sold on after so there are mileage and damage charges than can occur with PCP deals. At the start of the agreement, you will set an annual milage limit and agree to keep the car in good condition.
