If you’re in the market for a new car, don’t forget to put as much time into getting your car finance right as you do into getting the right wheels. In no particular order, these are some common mistakes to avoid...
1. Not working out your budget
Lenders have responsibilities to ensure you can reasonably afford to repay any proposed loan repayments, so having a realistic idea of your affordability is a good start.
Not only will it help you feel confident you can afford to repay your car loan – it will also give you a ballpark figure on what type of car you can be looking at. When working out your budget, don’t forget to factor in all your regular outgoings – even the gym membership.
2. Not knowing your credit score
Besides your affordability, your credit score is another important thing to consider when applying for a loan. It can be the deciding factor in whether your loan is approved or declined; and at the very least, it will influence how much you can borrow, and on what terms.
Did you know that it’s not just defaults or collections that will affect your credit score? Even paying your phone or power bill late, or missing a credit card payment, can impact on what your credit score is.
When applying for finance, the lender will look at your credit history to assess the likelihood of you repaying your loan on time. So consider checking it first (it’s free), and then take any necessary steps to improving it.
3. Not getting your finance sorted in advance
Getting approval before you start looking for a new car is all about knowing how much you can borrow.
In addition, having a ‘pre-approved’ loan puts you in a similar position to a cash buyer – which may give you some negotiation ability. Even better, it allows you to check out your new vehicle options at multiple car dealers, rather than having to find something you like at a car dealer where your finance is approved.
4. Not understanding the loan structure
In the excitement of getting a new car, it might be easy to skip over the fine points of the loan agreement. But it’s really important that you understand exactly what you are signing up for.
Even if you know that the payments are manageable within your budget, take some time to see what interest rate you are being charged, what fees apply and what your total repayments will end up costing. Plus, if you want to pay your loan back more quickly, you’ll want to make sure that there are no penalties that apply to early repayment.
AA Money can help you get the loan and loan structure that’s just right for you and your budget. Talk to us, and we’ll see if we can get you a pre-approval to go shopping for the next car of your dreams.
If you would like to know about your car finance options, email or call to the team at AA Money about your needs today. Contact us on 0800 600 777. We are here to help you sort your money needs.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.