Buying a car is a big purchase, and hence it should be done after careful deliberation. A few people are out there who can afford to pay down for the full cost of the car outright. However, now buying a car is not a big deal because car dealers offer various ways to finance your car and thankfully they all are affordable.
When it comes to funding your car, you generally look at interest rates, but there are various other factors you should consider to make a decision. Each car financing option works differently, and hence it is essential that you carefully analyse the deal you are choosing to suits your budget. Here are some of the dos and don’ts while looking to finance your car.
- Budgeting is a must
Car finance in Ireland allows you to manage repayments in small instalments, but note that you will end up paying much more than the total cost of the car. This is because you will be paying interest along with the market value of the car.
When you are borrowing money to buy a car, it means it will be in your possession, but the ownership will remain with the lender. If you fail to discharge the debt, you will lose your car.
Although auto loans carry lower interest rates than personal loans because they are secured, it is essential to monitor your repaying capacity. Even if you have a sound financial condition currently, you should have a backup in case life throws you a curveball later.
Make sure that you will have enough money with you to keep up with repayments even if you lose your job or your business runs on empty. To get an idea of how much it will cost you, use online calculators.
Note that they will help you get an estimate only. Try to prepare yourself to pay more than this because interest rates depend on the type of car finance option, your credit rating, employment, and financial condition.
- Apply even if you have a bad credit rating
Since you are borrowing a large amount of money, a lender will always check your credit score along with repaying capacity. If your credit report is not up to scratch, it will hold you back from qualifying for the loan. Still, there are a few lenders that are ready to accept applications from bad credit borrowers provided the file does not have a record of multiple defaults. Otherwise, it will prove your negligence, and you will fail to qualify for the loan.
Note that you will get a deal with slightly higher interest rates in case of bad credit. Make sure that you will not fail to keep up with repayments down the line. It is always advisable that you should arrange a large deposit size. The higher the deposit, the smaller the size of the loan. This way, you will be able to save a lot of money on interest.
- Check whether the car will fulfil your needs
Just because a car is available at lower prices, it does not mean that you will lunge at it. It is crucial to check its mileage, space, and the like. Some cars may have a lower market value, but they consume a lot of fuel. Check online reviews and all the features of the car on its website to make sure that it offers that everything that you are looking for.
- Do not forget to check all costs involved
While making a budget for your car repayments, you can easily forget to include other costs associated. Car is a depreciating asset, which means its salvage values keep going down due to normal wear and tear.
You may have your car repaired from time to time. Further, regular maintenance cost quickly adds up. Do not forget to consider additional fees charged by lenders while processing your application. Maintenance expenses are higher for expensive cars. So, buying a cheaper can bring down your other costs.
- Do not throw your whole savings at down payment
A large amount of deposit can help you save a lot of money on interest, but it does not mean that you will dip into the whole of your savings. What if an emergency catches you up? Try to have some money left in your savings to meet unforeseen expenses.
Taking out car loans in Ireland should not be difficult. However, you will have to bear the points mentioned above in your mind. Identify your needs to ensure that the car you are buying is a right fit, check your credit rating and repaying capacity, and have a back up for repayments in case of a financial emergency.