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What are the best ways to finance your car?

18th July 2022 Print

Buying a car is everyone's dream, but not everyone can afford to buy a car upfront. So they choose to finance their car in a way that they can pay its price in easy instalments. By doing this, you can get rid of the financial burden of buying a car at once and easily distribute your expenses over a long period of time. 

What Does It Mean To Finance Your Car?

Financing your car simply means that you are spreading the cost of your car over months or even years. This process allows you to make a car more affordable for you. Financing does not mean borrowing a sum of money and relaying it after a certain time. It also means finding the best way to pay all your debts without having to pay a huge amount of interest. And you can do so by following one of these methods. 

Obtaining A Pre-Approval

Buying a car is always a big step in one's life, and if you plan your purchase beforehand, then you can get yourself a good deal. By doing this, you can find yourself a loan that will charge you less interest and will also give you some discounts on your purchase. This method of securing a car loan is called pre-approval. 

In this process, you will have to give a fixed amount to the lender, who will then give you an offer according to your financial records. Getting a pre-approval helps you in many ways; it helps you get an idea of your credit score and all the kinds of loans that you are eligible for. Having a pre-approval will also portray you as a serious buyer in front of any seller, and they will be more serious while dealing with you. 

Buying Upfront 

The best thing that you can do is buy a car upfront. You can do it by collecting enough cash to buy a car. Furthermore, you need to have extra cash in your hand to cover all the running costs and overhead expenses while buying a car. You also need to have some extra savings for insurance, servicing, and registration costs. This method does not require a good credit score, and people with Bad Credit Car Finance can also buy cars. 

Set Up Hire Purchase

Hire purchase can be the best way to reduce your monthly instalment on the car. With this method, you will have to pay a small deposit, and the rest of the amount can be divided into monthly instalments. When the repayment period ends, you will get complete ownership of the car. Furthermore, you can reduce the instalment.

Make Use Of Credit Cards

One of the best ways to finance your new car is to use credit cards. This option applies to those who have high transaction limits. If you already have lots of loans on your credit card, you will not be eligible to use your credit card in this case. Your credit score must be 750+ to get financing for your car easily. A good credit score can really make a difference, and you can get financing or a loan for your car quickly on your credit card. 

Before you use your credit card to buy a car, you must also see the interest rate you will have to pay on your credit card for your new car. Also, compare those prices with different sources of finance and see which one is more suitable. 

Find the right loan terms

No matter what your credit score is. Some of the dealers will always try to sell you the car on a long-term instalment basis. They will not ask you for any down payment and will get ready to provide you with a loan for more than four, five, or six years. In such a case, you must make smart decisions. 

Always opt for the hire purchase system or low-cost EMI for early payment clearance. The more time you take to clear the payment, the higher the interest is charged. So, try to avoid buying a car on long-term instalments and give preference to short-term instalment periods. 

Here are some methods which you can use to finance a car and get yourself the dream car. If you are confused about which method will be the best for you, contact a consultant who can guide you better. So what are you waiting for? Get your dream car now.