How to Finance a Used Car – Getting it Right

The fact you’re reading this article probably means you want help on how to finance a used car purchase.

It would be nice to say that if you contact the “Free Money On Demand” company, they’ll immediately deliver a truckload of cash to your front door and charge you nothing for it. If only!

In reality you’re probably going to have to think a little about things and avoid rushing in – at least if you’re looking for the best deals possible.

Try to clarify your own financial position.

Before you get any loan from anyone, you will need to be able to explain your overall financial position. They’ll most likely need to know how much you’re earning, the nature of that income and what your monthly outgoings are.

They need this to try and understand how much you can realistically afford to pay back each month and from this they’ll know the maximum amount they could lend. You won’t help your case if to start with potential lenders see that you’re unclear about things as basic as how much you earn each month or how much you’re already paying out on things such as mortgage or rent. It won’t create a picture that you’re in control of your finances!

Deposits = confidence & lower cost.

Many lenders like to see that you are contributing some money to the purchase. The percentages may vary but asking for a big loan when you’ve only got 14.75 pounds to offer as a deposit won’t inspire confidence. There may be some zero deposit deals available but it’s worth remembering that these mean you’re borrowing more and therefore the repayments will be higher. In some cases ‘zero deposit’ interest rates may also be higher.

Keeping your feet on the ground.

Any professional and scrupulous lender will want to see that the value of the asset (car) bears some relationship to the reality of what you are trying to borrow and proposing to pay for it. Many lenders will have a comprehensive knowledge of vehicle values and while you think that 20-year-old rust-bucket is in fact a future antique and a snip at the price – they may not share your optimism.

Thinking about the options for financing.

If you have verifiable regular income and assuming you do not have a catastrophic credit history, you will probably find that there are many lenders around such as banks, building societies, finance companies etc. It may pay to avoid the temptation to take the first one offered just because it means you’ll get the car faster. You may get a much better lower-cost loan by shopping around or getting someone to shop around for you.

Recognising the complexities of car finance deals.

If you’re not completely comfortable with the complexities of interest rates, repayment periods and service charges, or if you have a history of credit problems, then you may want to think about using a specialist car finance service.

That’s because it’s not always easy to tell at a glance what the best offer is for your particular situation. There are specialist car finance websites that do offer a broad-spectrum knowledge of how to finance a used car and you may learn a lot from reading through their services and advice. More importantly, you could also save yourself a lot of money!

Financing a used car will for many be easy. How to finance a used car in the most cost-effective fashion may be more demanding and need a little preparation combined with expert help to find the right deal. Good luck: