How to make car finance payments more manageable

How to make car finance payments more manageable

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If you’re looking to get a car on finance or you’ve already got a finance deal that isn’t right for you, you may be wondering how you can get the best deal and make your payments more manageable. With the cost of living at an all-time high in 2022, more people than ever are looking at how they can cut costs at home. For many drivers, having a car is their lifeline and it’s important that you don’t pay any more than you need to. The guide below has been designed to help you discover the ways in which your car finance payments are affected and how you can make them more manageable.

Which factors affect the cost of car finance? 

When you apply for car finance, you will receive a car finance quote from a lender. It’s true that these quotes can differ massively from lender to lender and each applicant will get a personalised quote to match their circumstances. There are a whole number of reasons why your car finance payments can differ from another applicant. From choosing the wrong lender, to a low credit score, each car finance applicant will have a totally different experience with their car finance deal. 

Some of the most common factors that can make your car finance deal more expensive are: 

  • A bad credit score due to missed or late payments
  • No previous borrowing history
  • A higher interest rate
  • No deposit contribution at the start of the agreement
  • Choosing the wrong lender for your circumstances
  • Opting for the longest loan term possible 

Let’s take a look at each in more detail and help you get on the road to more affordable car finance. 

How to make your car finance deal cheaper:

There are a number of factors you could consider when you’re applying for finance or if you already have a car on finance to help make your deal a little more manageable. 

  1. Improve your credit score

If you have bad credit, don’t worry, there are specialist lenders who would consider your car finance application and even give you an approval. However, guaranteed car finance for bad credit isn’t really possible and taking the time to work on your credit score can get you a better car finance deal. Lenders usually reserve the best rates for people with better credit score such as ‘good’ or ‘excellent’ because they tend to be less of a risk to lend to. A better credit score usually indicates that you have a long history of making payments on time and in full and usually don’t have high levels of debt. If you can, you should improve your credit score in the run up to your car finance application to help make your deal more affordable. 

  1. Use a car finance broker

Many drivers still think the easiest way to get a car on finance is by heading straight to the dealership. However you could save money by sorting your car finance first. By using a car finance broker, you don’t have to apply with multiple lenders. Instead, the broker works on your behalf to match you with the most suitable finance package from a wide range of the most trusted lenders in the UK! You can then use your finance deal to get any car from a reputable dealership. Many car finance brokers also have access to subprime lenders for bad credit too but it’s worth checking before you apply. 

  1. Choose low rates

It is possible to get 0% interest to pay on a car, but most car finance deals do require you to pay interest on top of your loan. Your APR offered is calculated by the cost of borrowing and includes any other additional fees too. When shopping for car finance, you should try to find the lowest possible APR for your circumstances. This is where a broker comes in handy too as they can do this for you. A higher interest rate means you will be paying more overall and can make your car finance agreement way more expensive than it needs to be. 

  1. Refinance your current deal

If you already have a car on finance and you’re struggling to make your payments work, you could consider refinancing your current loan. Refinancing is when you replace your current agreement with a new loan with better terms. Usually, you can choose to lower your monthly payments or shorten/lengthen the loan term to make it more manageable. If you’re coming to the end of a PCP agreement and your current lender won’t refinance your balloon payment with bad credit, there are specialist lenders who can help and allow you to keep the car. 

  1. Choose a smaller loan amount

One of the biggest factors that can also affect your car finance costs is the value of the car you want to get. The higher the value of the car, the more your monthly payments will cost. It’s also worth remembering that there are different forms of finance too. PCP can benefit from lower monthly payments when compared with hire purchase as you aren’t spreading the full cost of the car. However, if you want to own the car at the end of the deal, there will be a large balloon payment to pay. It’s worth comparing different types of car finance agreements to see which would be the most suited to your circumstances. 

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