23 November 2009

So you want to buy a new car!  Whether the car is new or just new-to-you, the chances are that you may need to look into Car Loans to help finance your purchase.

There are a few things you may want to think about when deciding what’s the most suitable  deal in car loans for you.

What can you comfortably afford?

You may want to take some time to work out a repayment level that's right for you and which fits your financial circumstances. It may also be worth remembering that buying the car is one thing but running it something else. Remember to factor into your calculations the day-to-day costs including things such as car tax and insurance. Petrol and diesel are expensive these days so it may be worth factoring in those as well. There's no point in having your dream car sitting outside if you can't afford to drive it.

Do you need loan insurance?

Once you've done your calculations, you may also want to consider what would happen if your income dried up for one reason or another and you were unable to meet your car credit repayments. 

What would you do if your car was stolen or written off?  Your insurance may cover the replacement costs of the car itself but that may not be enough to cover the total cost of any outstanding finance you may have. There are insurance policies, which can protect you against loss of income or fill the gap between insurance and loan value.

If you feel that you may feel more comfortable with this type of insurance, don't forget to include the premium costs in your overall ‘affordable spend’ calculations.  

How much can you afford to put down as a deposit?

You may get a better deal on your car loan if you can afford to put down a reasonable deposit towards the purchase price – typically the bigger the deposit, the lower the cost of the borrowing will prove to be for you over time.

Where is the best place to borrow?

You know what you need and what you can afford.  Although you may be in a better position if you have your money arrangements ready and available when you want to buy, trying to set up finance arrangements for a car in advance can be tricky.  The three main options are

•    Banks and other high street lenders.  This may be the simplest option if you are buying from a private individual. On the downside, bank car loans are not always easy to obtain and you may be required to find a sizeable deposit;
•    Hire purchase agreement from the dealership you are buying the car from. A simple solution but you may have nothing to compare their lending costs to.  How good is the deal?  Once again, you may also have to find a large deposit;
•    An online motoring specialist where you may be able to arrange your finance, select and buy your new car and perhaps even sell your old one - all at one time.  These sites can offer comparison facilities that may allow you to choose the car and the finance deal that’s best for you.

Whatever your chosen car loans route, it may be advisable to avoid being tempted to take a bigger car loan than you can comfortably afford.
 

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