Many car drivers choose to take out finance when they purchase a vehicle. While this can be a good way to spread the cost of a car, there are some things you should consider before taking out finance. In this blog post, we’ll run through 7 important things you should think about.
1. How much can you afford?
Before taking out finance, it’s important to work out how much you can afford. Not only do you need to consider the cost of the car itself, but you also need to think about running costs such as fuel and insurance. It’s also worth bearing in mind that you’ll need to make monthly repayments on your finance agreement. Make sure you have a clear idea of your budget before taking out finance.
2. What type of finance is right for you?
There are different types of finance available, so it’s worth doing some research to see which one would best suit your needs. For example, hire purchase agreements allow you to spread the cost of a car over an agreed period of time, while personal contract plans (PCPs) offer low monthly repayments followed by a balloon payment at the end of the agreement. It’s important to choose the right type of finance for your circumstances.
3. Can you afford the deposit?
Most finance agreements require a deposit, so you’ll need to have this saved up before taking out finance. The size of the deposit will depend on the cost of the car and the terms of the agreement. It’s worth shopping around to see if you can get a better deal elsewhere if you’re struggling to afford the deposit. Be sure to ask what is the lvr ratio here to get the lowest possible interest rate.
4. What happens if you miss a payment?
If you miss a payment on your finance agreement, you could be charged a late payment fee and your credit rating could be affected. It’s important to make sure you can afford the monthly repayments before taking out finance, as missing payments could have serious consequences.
5. Are there any additional fees?
When taking out finance, it’s important to check if there are any additional fees involved. For example, some lenders charge an arrangement fee for setting up the agreement, while others may charge early repayment fees if you want to settle your loan early. Make sure you’re aware of any potential additional charges before signing up for finance.
6. What is the APR?
The APR (annual percentage rate) is the interest rate charged on your loan plus any additional fees. This is expressed as a percentage and will affect how much you end up paying back in total. It’s important to compare APRs when shopping around for deals as this will give you a better indication of how much the loan will cost in total.
7 . What is the term of the agreement?
The term is the length of time over which you’ll repay your loan. This could be anything from 12 months to 60 months, depending on your circumstances. It’s important that you choose a term that works for you so that you don’t end up overpaying or defaulting on your loan.
These are just some things to keep in mind before taking out finance on a car – do your research and make sure it’s affordable for you
