New year, new car loan
Posted on 03 January 2018
Another year has rolled around and it may be no surprise that you’re in need of a new car. Perhaps your old car has finally given up the ghost or maybe it’s just time for a new model. Whatever the reason, now’s a good time to find a car loan that works for you and helps you get a car you can afford to enjoy.
Start by setting your car loan budget
Before you go shopping for a new car it’s a good idea to get a handle on what you can afford. Setting a budget for your next car purchase is a balancing act between affordability and desirability. So it’s a good idea to take a practical look at your finances before you get excited about a set of wheels you may not be able to pay for.
Working out your budget is quite straightforward and an important part of the car loan application process. Begin by calculating all your income on a monthly basis. Then total up your costs and subtract them from your earnings. The sum that remains is the money you have leftover to pay for your monthly car loan repayments.
Factor in the cost of running a car
If you already have a car then the cost of fuel, maintenance, and additional extras like registration and insurance should be included in your calculations. It’s important to update these numbers as you start shopping around for a car especially if you’re changing make and model.
Running costs can change dramatically between car types. You’ll notice an increase in fuel consumption if you move to a sporty model or a four-wheel drive. Make your next set of wheels turbo-charged or higher in value than your previous car and you can expect an increase in car insurance costs.
There’s no point in setting up a car loan that costs so much that you can’t afford to take your car out on the road. Some smart calculations upfront can help you to ensure that your car is within your means and you can enjoy driving it as much as you need to.
How long do you want your car loan to last?
Set your monthly repayment levels to work to your budget but try to avoid setting it too low. It’s possible to reduce your repayments by increasing the duration of your car loan.
Try to be realistic about how long you want to be making repayments on your next car purchase. The longer the car loan term the more you will pay in interest. It’s also wise to avoid your car depreciating in value faster than you clear your car loan debt.
Does your car loan need to be flexible?
Is your income fixed across the year or do you enjoy an annual bonus or a fluctuating salary? Is there a chance you could experience a windfall or enjoy a pay rise during the life of your car loan? If you have answered yes to either of these questions you may benefit from choosing a car loan that allows you to be flexible in your repayments.
Repayment flexibility can involve a one-off payment, a regular one-off payment (for example bi-annual or annual), or the ability to change the amount that you repay monthly. If you do not include the need to be flexible in your repayments when you set up your loan you may incur a penalty fee if you exceed an agreed repayment amount.
Repaying more of your car loan sooner will allow you to reduce the principle of the loan (the amount your originally borrowed) faster. That in turn will reduce your interest charges and make it quicker to pay off your loan. If you are likely to have additional funds available, building flexibility into your car loan could have a very positive financial impact.
Get your car loan pre-approved
If you’ve worked out your budget and made some calculations about what you can afford, you’re probably ready to get your car loan pre-approved. Do some desktop research on the make and model you would like to buy so you can let your preferred provider know. Then it’s time to make some phone calls.
Don’t forget to call our friendly team at OnlineCarLoans and let them know what you need. They will be happy to help you find a car loan that suits your budget and your expectations. Experience the difference that great customer service makes when setting up your car loan.
Contact us today on 0800 88 2000