Buying a new or secondhand car is one of the most significant expenses of most people’s lifetimes. Fortunately, car finance makes the whole ordeal more affordable so that you can pay for your much-needed vehicle in low monthly installments rather than splashing out more money than you can reasonably afford in one hit.
Even if you have saved up enough money, purchasing a car with finance may offer a whole lot of perks such as servicing and more options to choose from rather than a standard cash purchase.
So if you’re looking for a flexible way to pay for your next car without breaking the bank, check out our 8 reasons why you should consider financing your car:
Opting for finance generally opens up a whole world of choice that you don’t typically get with a cash purchase. Primarily because finance allows you to pay off the vehicle in low monthly installments over a few years, allowing you to afford a more expensive, high-end car that is still within your budget.
Buying a new or nearly new car also ensures that you will get access to the best safety tech on the road and spend less on repairs at the garage. Plus, most manufacturers throw in a generous warranty to keep you covered for the first three years or more for bonus peace of mind.
If you’re fortunate enough to be able to purchase a car upfront, you are a minority. With over 90% of new car purchases in the UK bought with the help of car finance, it’s easy to see why spreading the cost of an expensive purchase over several months is the attractive option.
What’s more, any savings you do have can be put to better use elsewhere as you reap all the rewards of financing your vehicle.
Car finance is one of the best ways to boost your credit score. As long as you make all of your payments on time and none are missed, you’ll quickly improve your score as you demonstrate to other potential lenders how good you are at managing your credit no matter what type of car finance you choose.
So if you’re hoping to impress a mortgage dealer or simply improve your chances of being approved for future loans without a fuss, then applying for car finance is the way to go, especially if you are new to the credit market.
But what about people who have been rejected in the past?
Car finance is accessible to all, regardless of your circumstances. While not every lender will take a risk on you due to your previous credit history, there is a range of lenders out there who specialize in bad credit car finance.
Yes, you may have to pay a bit more than those with a good or excellent credit score, but being accepted regardless of a previous bankruptcy, IVA, CCJ, default, or because you are self-employed can help you improve your score and get the car you want.
Classic bank or personal loans are unsecured loans, meaning that collateral is usually needed to make you less of a risk to the lender.
But with car finance, you’re not expected to put anything down as collateral as the car serves as the collateral for the loan instead. So if everything goes downhill and you miss a payment (although unlikely if you keep to your payment schedule), nothing but the vehicle that has been financed is at risk.
In short, your home, business or assets aren’t at risk should the worst happen.
Fixed terms and fixed monthly payments make budgeting far more straightforward. With any car finance agreement, you will know exactly how much you owe and when each payment will be deducted from your account.
As you keep track of your finance payments, you can work towards future savings and budget for future expenses simultaneously.
If you are a business owner, you’re likely already aware of all the taxes you have to pay. But, if you choose to buy car finance with your business name, then your purchase may be tax-deductible.
The type of car finance you choose will ultimately decide how much tax relief you get. For example, with a hire purchase agreement, company expenses can only cover the interest payments.
However, claim capital allowances can lower the overall costs of your chosen vehicle as it reduces taxable profit. But like all finance agreements, make sure you stick within agreed mileage limits and keep the car in good condition.
Bear in mind, it’s rare that lenders will cover the VAT costs, so be prepared to fork out a bit extra to cover the expenses.
The type of car finance you choose should reflect your lifestyle. So if you want to own the car eventually, you should consider a personal loan or personal contract purchase (PCP) as an option.
But, if you’d rather keep monthly costs down and switch your car more regularly, you should look at personal leasing or personal contract hire (PCH). While there is no option to buy at the end of your term, it allows you to upgrade your vehicle more easily.
If you’re not too bothered about what car you drive away from the dealership, you should think about new manufacturer finance deals. These include 0% finance, no-deposit deals, lower interest on new cars and deposit contribution discounts, which can all save you money in the long run.
Servicing is often included with most car finance deals. Combined with the manufacturer’s warranty, you’re financially covered if anything should go wrong.
What’s more, some finance packages will have a host of extras included, such as discounts on travel insurance, holidays, roadside assistance, and more. Make sure you look at all the fine print to see what’s included in your deal.
Car financing is ideal for those who are looking to purchase a car that they cannot afford outright. If you decide to sell your car through Exchange My Car, you will be able to use the value of the car you have sold with us towards the purchase of your next car and you will have the opportunity to finance the remainder (if required).
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