4 Car Finance Mistakes to Avoid

4 Car Finance Mistakes to Avoid

Okay, so the time has finally come for you to take the plunge and buy yourself a new car. Your old banger has finally given up the ghost, and you’re looking to treat yourself to something a little more upmarket and expensive. Unless you have a few grand laying around the house, car finance may be your only option to make your monthly payments more manageable. Before you apply for car finance however, there are some things you need to know. Car finance is not a given, and you aren’t guaranteed to be accepted and approved. To help give you the best possible chances of success however, here are 4 car finance mistakes to avoid making.

Failing to check your credit score before applying

Before you even consider applying for car finance, the first thing you need to do is check your credit score. There are a number of websites online that offer this service for free, and while they aren’t generally 100% reliable, many of them are pretty accurate and so they will give you a rough idea of what your score and rating is. If you check your score beforehand, it gives you an idea of what your chances will be of being approved. If for example, you check your score and your rating is low this means you will likely not be approved. If your rating is good, your chances of being approved increase. It is worth knowing your score because if you are rejected, your credit score will actually drop further, and vice versa if you’re approved.

Not shopping around

The car finance market in Europe is incredibly lucrative, which means that there are plenty of companies out there that want a piece of the action. This is good news for car buyers because it allows them more choice and more options. Before you consider applying for car finance, read reviews online, post in forums, and do your own research to try to find out more about the different options available to you. Yes, we know it’s time-consuming and how you’re desperate to get behind the wheel of your new motor, but if it means you save a few hundred Euros each month, surely it’s worth doing?

Not setting a budget

When you buy a new car, you need to set yourself a maximum budget well in advance. The issue with finance is that, because the monthly payments are often so manageable, people forget how much they’re actually paying for the car. Before buying, give yourself a maximum budget and don’t forget how, over the years, when your car finance deal has ended, you will likely have spent more money than the car was valued at, at the time of purchase. It sounds unfair but that’s how finance works. Make sure you factor the interest payments into your total budget.

Beware of early payoff penalties

This sounds bizarre, but if you suddenly decide that you would rather pay off the price of the car in one lump sum, and therefore pay off your car finance in one go, often there may be hidden penalties. That’s right, for paying off the car early, you are sometimes charged a penalty, as it means the lenders may make less money from interestover the coming months/years. Be crystal clear on all terms and conditions when buying a new/used car.