With these types of finance, a good credit rating can be the difference between getting a good interest rate or not, or sometimes getting any deal at all.
How much did you spend on your first car?
Many of us will have handed over a few hundred pounds at most just to get our young hands on a car of our own, even if it had seen better days. Well, things have changed these days, with a generation gap when it comes to car-buying habits. One in five 18-24 year olds, rather than buying a used and fairly old car, now chooses to lease their car. This is more than double any other age group, with just 5% of 41-45 year olds, and 6% of 46-50 year olds choosing this type of credit.*
Key tips for buying a new car:
- Do your research: Use calculators and comparison websites to understand the different options available, find out where the best deals are and what type of arrangement will suit your circumstances.
- Check your credit report: As soon as you make the decision to buy, check your credit report with all three credit reference agencies. Ensure everything is accurate and up to date and reflects your current circumstances, including the exact way your address and other personal details appear on your credit report.
- What kind of finance:There are several ways to finance your car deal – from a personal loan to a 0& purchase credit card, from hire purchase to a PCP loan. (more about each of those here) Whatever you decide, just try to make sure that you can afford the monthly payments and that you would still be able to afford them, even if your circumstances change. There are different pros and cons to all of these, depending on your individual circumstances. Do your research – and always remember to check the small print for hidden catches!
- Room for improvement: If your credit report has areas for improvement, make a plan to get it into shape well before making your loan application. There are a number of steps you could take, including: ensuring you’re registered on the Electoral Roll; paying off more than the minimum repayments on your accounts each month and making sure never to miss a repayment.
- Don’t overlook the details: Buying a car on credit is an investment that costs more than just a deposit and monthly repayments. Before you sign on the dotted line, make sure you’ve considered the additional costs and that you can afford to repay everything you’ll owe when you make the purchase. Additional costs might include insurance, fuel, maintenance and road tax. Meeting your monthly repayments on time should help keep you on the road to a strong credit rating, too.
*Research was carried out online by Canadean in October 2015 among a sample of 1,000 UK adults.