Most people considering buying a car, whether they’re after a brand new car from a local showroom, or a second hand model from a private seller, will need to take out vehicle finance in order to pay for their purchase.
To make sure you’re able to borrow the money you need, and at the best interest rate available, you should consider the following car finance requirements and points before submitting an application.
1. Avoid Too Many Credit Checks
Applying for auto finance with too many loan providers can affect your chances of being approved by any lender. Credit reporting bodies make note every time a financial institution checks your history, and if you’ve applied for dozens of car loans recently, they may consider you a high risk and refuse to finance your new car purchase.
You can obtain a copy of your credit report to make sure it contains nothing untoward. In the meantime though, only apply for a loan once you’ve identified a company that offers competitive car finance rates. Whatever you do, do not make multiple applications at the same time. Read more about avoiding a busy recent credit history.
2. A Newer Vehicle
New vehicle finance can be easier to get approved for than used car finance. If you can afford to buy a new car rather than one that left the factory many years ago, you may stand a better chance. Older vehicles are more difficult to sell and are worth much less, so finance companies see them as a risk and are naturally keener to accept a new car as collateral than an old banger. You can still have a loan approved for an older car, it’s just a lot easier to get approved for a brand new car.
3. Read The Terms & Conditions Carefully
This is a must before committing to any loan agreement. Some companies levy administration and arrangement charges on top of the interest fees when lending money and you should be aware of all the costs involved before you borrow money from a car finance company. Most companies are more than happy to discuss the details of their vehicle loan contracts so it’s worth giving them a call if you’re not sure about anything in particular.
4. Pre-Approved Car Finance
If you’re intending to buy a car from a local dealer, apply for a pre-approved loan before you go to discuss terms. If you already have the money available you’ll be in a better position to bargain and not have to worry about being pressured into using the dealer’s finance facilities, which offer loans for their cars but are often less competitive than those offered by independent brokers.
5. Paperwork in Order, Full-Time Employment & Savings
Have all the necessary paperwork ready to submit. What documents do you need for car finance? If you can show you’re in full-time employment and save money on a regular basis, you’ll stand a much better chance of being approved for a car loan. Aim for proof of employment, regular payslips, bank statements, and obviously proof of identity.
As with any other long-term financial arrangements, it’s never wise to rush into making a decision when shopping for a loan. Do your homework, be patient, and you could be rewarded with a better car finance deal than you thought possible.