How To Get Cheap Car Finance Monthly Payments

If you’re looking to purchase a car and finance it, you likely want to keep your costs as low as possible. With the cost of living rising and pretty much everything seeming more expensive than it’s ever been, it’s important that you cut costs where you can. Getting a car can be one of the biggest purchases you will make and car finance agreements usually last 3-5 years, that’s why it’s really important that you choose an affordable agreement which you can pay back each month. If you’re looking for cheap car finance, there are a few factors you can consider to lower your monthly payments and make your deal more manageable.

Compare APR rates

It can be possible to get a car on finance with no interest but in general you will usually be required to pay interest on your car finance agreement. Your interest rate offered reflects the rate of borrowing and higher interest rate means you pay more to borrow money from a lender. When comparing car finance deals, it’s not just about the lowest monthly payments and instead you should also compare APR rates and opt for the lowest available to you. APR is different to interest rate as it includes any other additional fees you will need to pay.

Check your credit report

When you apply for car finance, it can be hard to avoid having a credit check run on you, and you should definitely be wary of companies offering car finance with no credit check. It’d be irresponsible of a lender to offer finance without knowing the credit situation of a buyer and goes against the rules of responsible lending. Before you apply for a car, you should check your credit report and make sure that all of your information is accurate and up to date. Having misinformation on your file can negatable impact your score and if the information listed on your report doesn’t match your application, lenders may be worried that the application is fraudulent. If you need to make any changes to your credit report, you can contact the credit referencing agency who provided it.

Save up for a deposit

For car finance deals such as hire purchase, it can be required to have a deposit to secure your deal but also a larger deposit can work in your favour. Putting more down at the start of the agreement, reduces the total loan amount and also makes you more favourable to lenders. A smaller loan amount can make your monthly payments lower or shorten the loan term so you can pay off your deal quicker.

Improve your credit score

Whilst it can be possible to get car finance with a low credit score, improving your credit before you apply can help to increase acceptance rates and get you a better interest rate offered. Lenders usually save the best rates for people with better credit scores as they’re less likely to default on their loan due to a history of responsible lending. Missed or late payments can have a detrimental effect on your credit score and your ability to borrow money. Where possible, you should try to build a history of making payments on time and in full, reduce any existing debt you have, keep credit usage low and avoid multiple applications for credit in the run up to your car finance application.

Stick to your budget

Affordability is key when it comes to getting a car on finance. Your monthly payments will need to be paid on time and in full each month over a number of years so it’s important that your finance budget is realistic and affordable. If you’re buying a new car direct from a dealer or manufacturer, you will usually be offered many optional extras that you don’t necessarily need but saying yes can make your finance deal way more expensive than it needs to be. You should try to stick to your monthly budget and don’t feel pressured to sign up for anything you don’t need from your agreement.

Set a realistic mileage

Car finance agreements such as Personal Contract Purchase (PCP) are a form of secured loan which means the lender owns the car throughout the agreement. Most drivers choose to hand their car back at the end of the PCP deal as there is a large balloon payment to be paid at the end of the deal if you wish to keep the car. The lender will require you to set an annual mileage whilst you use the car throughout the term to calculate the future value of the vehicle. If you exceed the mileage, you will have to pay additional charges which can make borrowing more expensive.

Keep the car in good condition

Both PCP and hire purchase car finance agreements are secured loans. The lender owns the car until you pay the final payment on each agreement if you want to keep the car. Throughout the car loan term, you will agree to keep the car in good condition. If you hand the car back in a state that goes beyond general wear and tear, you will have to pay additional damage charges. You will also need to have the car inspected as required by your state and stay up to date with regular servicing to reduce the likelihood of any unexpected repair costs.