On the road to buying your first car?

Are you about to buy your first car? Becoming a car owner is exciting, and it’s also a big commitment. Cars are usually expensive so chances are you’re going to need to sign up for a car loan. Here are some things to consider before you choose a car and apply for finance.

Quick takeaways:

  • Before you decide on a car it’s important to be realistic about your budget. That way you can make sure your car loan is affordable.
  • Invest some time upfront in working out your costs. Both running costs and loan repayments need to be work for you.
  • Do you know how a car loan works? Understanding the structure of your loan will help you consider how to keep costs down.

First steps to car ownership

If you’re planning the purchase of your first car, it’s likely you’re going to need some help with funding. Cars aren’t cheap and most people have to borrow money in order to be able to afford one. It’s worth considering your options carefully before making a purchase and signing up for a loan.

What does affordable look like?

A good starting point is to work out your own budget, and how a car will impact it. You can make working out your finances pretty straightforward. Simply total your income and subtract your costs. The money left over is what’s available to pay for your car.

What are your running costs?

Owning a car isn’t just about the upfront purchase cost. There are various running costs that need to be built into your budget before you can work out what’s left for loan repayments. Petrol and maintenance are two major running costs. You also need to factor in registration, licensing and insurance.

How would you like to manage your loan?

Once you’ve estimated running costs you need to take a look at your loan options. What role do you want your loan to play? Some people like to focus on repaying debt as quickly as possible. That may mean letting lifestyle costs take a back seat in favour of fast repayment.

Other car owners would rather keep repayment costs down and have cash available to pay for other priorities. Whichever direction you prefer, remember that the longer you take to repay your car loan: the higher the interest costs.

Review your options and do some research

Now you’ve got an idea of your budget and you’ve reviewed your priorities; it’s time to see what’s on offer. Pull together a list of car loan providers and find out: how their loans are structured; the interest costs; and any fees or one-off payments. Remember to write everything down so you can review your options before you apply.

First time borrowing?

If you haven’t borrowed money before, you may find it more challenging to get access to cash. That’s because borrowers check your credit history to see if you can be trusted with their money. If you haven’t borrowed before there’s no credit history to show that you’re good at managing your debts.

Don’t let your credit history get in the way of buying your first car. It’s worth taking time to discuss your position with a car loan company that you trust. They should be able to talk you through your options and help you manage your loan and keep borrowing costs down.

Buying your first car is big step both for you and for your independence. It’s important to have a really good understanding of how your car finance works. Being able to manage the structure of your car loan will help you keep costs down. That means you can set up your finance to meet your budget and your lifestyle needs.

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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.