Car loans are all about affordability but it’s easy to get carried away. There are five main reasons why car loans become more expensive.
- Not working with car loan experts
- Buying with your heart and not your head
- Not considering running costs in your monthly outgoings
- Choosing a shorter term to pay off the loan as soon as possible
- Not planning for the unforeseen
We can help you avoid these pitfalls but at the end of the day it’s your decision to borrow, not ours.
Not working with car loan experts
You don’t need to work with car loan experts to access a great deal on a loan but it helps. We have access to lenders not readily accessible on the internet and have relationships with specialist lenders that can help.
We can also help with your application, assess affordability and the chances of acceptance before you apply.
Doing it yourself is possible but is also risky considering the seriousness of a car loan and its financial implications.
Buying with your heart and not your head
We talk budgets a lot here and for good reason. Setting a realistic budget before you test drive is a surefire way to avoid overspending or falling in love with a car you cannot afford.
If you know what you have to spend, you can avoid the cars you cannot afford. This should go some way to keeping the car affordable.
Not considering running costs in your monthly outgoings
When people assess their own affordability, it is common to forget things like gas, insurance, servicing and general running costs of a car. A car isn’t all about the loan. It needs constant feeding with cash to keep it on the road.
Not factoring in the cost of insurance and running costs can impact the overall affordability of the loan. If you borrow too close to what you can manage, it could be your undoing.
Choosing a shorter term to pay off the loan as soon as possible
It can be very tempting to apply for the shortest loan possible to help get it over and paid for. That’s great if you can afford the payments but not so great if you don’t have the headroom to manage comfortably.
Balancing the term of the loan with the monthly payments while factoring in running costs is how you make sure you can afford a car loan over the term.
Not planning for the unforeseen
Nobody can see the future but everyone can plan for it. Putting everything you have into a car loan, using up all your savings on a down payment and maxing out your monthly finances to pay for it will leave you exposed if something happens.
It could be anything. The loss of a job, of a partner, a boiler exploding, your roof falling in. You know the saying ‘plan for the worst and hope for the best’? That’s what we’re talking about here.
Keep a rainy day fund and make sure you can afford the car loan should something happen. Nobody likes thinking the worst but sometimes we have to!