When it comes to buying a car, a lot of thought needs to go into it. It is, after all, potentially the second largest investment after buying a house. With the current cost of living crisis, saving to buy a car outright may be a little harder. It could take a long time to raise the necessary funds, meaning you don’t end up with a vehicle for quite some time. This is part of the reason many people turn to used car finance deals. Used car finance can enable a quicker purchase and provide more options when it comes to picking the desired vehicle.
How do you know how much you can borrow and the parameters you need to meet in order to secure the finance?
Take a look below and see how easy it can be for you to get into your dream car quickly.
As with any type of finance, a lender will always look at your credit history. They will want to assess how in control of your finances you are. Things such as your current outgoings, your income and any previous forms of credit will all be assessed. For some lenders, a poor credit history can be the determining factor in whether or not finance will be offered. It is worth noting that if you have applied for multiple loans or missed several payments recently, your score will be severely impacted.
Without knowing how much you earn, a lender cannot determine how much of your income is already committed to other outgoings. Providing them with payslips or bank statements is a certified way of proving your eligibility to both borrow and afford to pay it back.
The simple answer is yes. By showing a lender the car you are interested in, it allows them to work out whether finance is a viable option for you. It also gives them an idea of how much they could lend and how much you wish to borrow.
You need to factor in running costs, which are significantly more expensive with some cars than others. You could have a dream car in mind and be approved for finance on it, but if filling its tank or having a repair job costs a large amount, you could find yourself in a worse financial position.
To work out whether a car is affordable for you, you can use the calculator from the money advice service. This will give you an idea of how much it costs to run the car.
Being realistic with the car you’d like will work in your favour for securing finance. Lenders will determine the amount they will let you borrow by looking at the value of the car. If they see you are asking for help to buy an £80,000 car but the payments are not affordable, they will more than likely say no, which can harm your credit score.
When a lender is assessing your application, they will look at how much it costs to insure, tax, fill and look after the vehicle. If these combined costs put you in a precarious financial position, you may not be offered finance. In some cases, though, if you can prove these costs are affordable, the amount you apply for could well be the amount you are approved for.
A deposit is certainly key to securing fast car finance, and will help determine how much you can borrow. If you can put down a significant sum to start with, you will have significantly more options. The car may well cost the same, but as the amount you are borrowing is so much less, you are more likely to be accepted. For example, you want to buy a car for £20,000 but have no deposit, you will be borrowing the whole £20,000. If, though, you’re able to put down a £5,000 deposit, you are only borrowing £15,000. A larger deposit may also mean you could borrow more, opening up opportunities to buy a better car.
Lenders will always look at the repayment plan and present you with a few options. Typically, a shorter agreement means more expensive monthly payments, whereas a longer term means lower monthly payments (although the interest will be a little higher). A longer-term plan also means you may be able to borrow more, so the car you initially had your eye on may be more affordable now.
The above has hopefully given you some idea of what is typically considered by a lender when it comes to car finance. Euphoria Finance can provide a free car finance quote, giving you visibility of much you may be able to borrow to secure your new or used car. It isn’t just cars, though – should you be looking instead for a motorbike, caravan or a van, get in touch. We love to say yes!
We can offer finance from £3,000 up to £25,000 and have over 50,000 vehicles available. Contact our team of experts today and get yourself on the road fast!