Is it good to finance a car?

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Most people do not have the cash to buy a new car outright. And even if they do, it’s tough to part with hard-earned cash when lenders are offering personal loans at low interest rates. Sometimes, buying a car in cash can also feel like you’re throwing money away, when you know your car will instantly lose value when you drive it off the forecourt. Considering this, and that most cars will lose 60 per cent of their value after 3 years, it makes no wonder that people finance their cars rather than buy them outright.

But, is it good to finance a car?

Well, it certainly makes a car more affordable. More attainable.

Splitting the cost of a car into monthly payments also means you can have access to a range of cars that you would otherwise not be able to afford if paying upfront. There are also some practical benefits to financing a car. For instance, if you keep up with your repayments, then that may improve your credit score. Furthermore, if you finance a car for its full value, then you will own the car after the loan period has ended. You can then sell it to recover some cash or run it safe in the knowledge that you aren’t paying it off anymore.

Financing a car – the pros and cons

Here’s a breakdown of some of the pros and cons of financing a car:

The pros:

• Easy to arrange
• Affordable repayments
• Low or high deposit
• Competitive interest rates
• Car is yours at end of loan (if a hire purchase)

The cons:

• Total amount payable will be more than the car’s value due to interest
• You are tied into a contract for up to 60 months
• The car remains the property of the finance company until you pay it off

For most people, the pros of car finance far outweigh the cons. This especially rings true of applicants who are financially stable. However, everybody is different, and therefore whether car finance is right for you depends on your circumstances.

Is finance right for me?

If you have a stable source of income and you are comfortable with monthly repayments, then car finance will be a good option for you.

What if I have bad credit?

Of course, finance is not right for everybody. If you have a long history of bad credit, or you cannot guarantee you will be able to keep up repayments, then it would be wise not to take out finance at all and pay in cash if you are able to. Car finance may still be available to you despite this, however. Some lenders are happy to take the risk. The biggest thing to keep in mind is that car finance for people with a bad credit rating has a higher interest rate than regular finance. This may make financing a car uneconomical.

What is the best way to attain finance?

You can attain funding for a new car in two main ways: by taking out a loan with a bank or independent lender, or by taking out specialist car finance. Applying for finance through a broker like motorfinance4u is a good way to start. We are car finance experts and we fund thousands of new drivers every month. We are committed to offering the best service and excellent finance rates. Unlike most lenders, we consider each application individually, in person, which is the best way to ensure a fair and just decision.

We recommend you use our car finance calculator to get an idea of how much your car loan or finance repayments will be. Our calculator can be adjusted for credit rating, the amount you would like to borrow and the repayment term.

Once you have an idea of what finance package will work for you, call us to discuss your requirements or apply online. It is quick and easy to apply for finance online with us, and we will always be just a phone call away to assist you should you need any help.

Remember to shop around

There are thousands of lenders out there to choose from, although specialist brokers do offer the best deals overall. To guarantee value, always shop around and never settle for mediocrity. You should pay special attention to the representative APR offered, the rate of interest, the loan term, the loan amount and the total amount payable on all your finance offers. This way, you will understand what’s good value and what isn’t.