20 January 2020 Concept Car
We all hate to admit it. But cheap is great. Not just if you’re looking for very poor credit car finance. Sure, it can feel satisfying to buy a grande pumpkin spiced latte at Starbucks. And it’s nice being able to afford a five course menu even if fish and chips would have sufficed. But at the end of the day, we love comparing prices and feel elated if we can save a few Pounds here and a few Pence there.
We believe this is a healthy thing. Times are tough and there is really no point in spending more than you absolutely need. Spending less also reduces the risk of having to go into debt. It goes without saying that’s a plus.
Of course, the larger the expense, the more you can potentially save. So if you’re already cutting corners on everyday items, finding the cheapest car loans should be your top priority. In this article, we’ll show you how to do just that.
If your credit rating is as low as your income, then cheap car loans probably seem like the only option. Interestingly, this is not necessarily the case.
Let’s explain what we mean by that.
The cost of a car loan depends on a few things:
There are a few sensible ways how to improve your chances of getting a cheap car loan. We’ll get to those in a minute.
Let’s first deal with an approach often suggested by many experts: Increasing your monthly instalments and bringing down the length of the loan.
It does seem like a good idea. After all, this can significantly reduce the total cost of the credit and make it a lot cheaper.
The problem with higher monthly rates is that they can become a burden.
What happens if you suddenly lose your job and no longer have a dependable income? What if an essential household item (such as your refrigerator) breaks down and your expenses rise? And what if the car breaks down and you need to replace it with another one?
In all of these cases, your risk of defaulting rises considerably, the higher your monthly loan rates are. This is why experts aren’t wrong to recommend limiting your loan term to 48 months. They’re just not seeing the full picture.
It’s always best to err on the side of caution. Keep your monthly rate to what you can reliably pay – even if it means paying a few Pounds more.
There’s another aspect to consider. These days, you’ll find more dealers than ever offering loans to those with a bad credit rating. Some of their offers can look quite enticing on paper. So, in keeping with your goal of finding the cheapest car loans, should you give them a chance?
Here’s the thing: There’s no such thing as a free meal. Dealers are not charitable institutions. They’re out to make a profit. Which is perfectly fine, as long as they’re honest about their methods.
If you’re a risky borrower with a low credit score, then you can not get a cheap car loan. It’s just not possible. Be wary if a dealer promises you conditions that sound too good to be true. If there’s a fine print, you need to read it finely as well.
It pays to invest more time before signing the contract. Better to spend it now than investing it into a lawyer afterwards.
At the same time, the dealer can be your best friend if you’re looking for the cheapest car loans. This is because dealers have found ways to provide loans which many banks would flatly reject. They have also made it possible to extend the length of the loan in such a way that you can afford a car even if your income is very low and your financial means are limited.
Previously, these deals were the domain of the buy here pay here establishments. Many of them were shady, to say the least. Over time, however, the BHPH lots have improved. Which means that you can find plenty reputable competitors offering perfectly reputable loans even to those with a problematic financial history.
This means that you can safely approach a dealer for the entire package and get the best possible conditions: Buying a car, trading in your old one and financing the deal.
Still, there are a few things you can do on your end to improve your chances of getting a truly cheap car loan. We’ve compiled some of the most important ones for you.
Just get a better credit score. It sounds equally alluring and impossible. After all, don’t we all dream of a better credit score in vain?
And yet, there are definitely a few things you can do to improve your rating:
The Internet has dramatically changed the way we buy stuff. Cars are no different in this regard. You can now look for offers at not just one or two dealers, but shop around with many, many more.
In fact, this is exactly what you should be doing. Especially if you’re looking for the cheapest car loans around, you need to look for many different options and compare many different used cars for sale. Thinking outside the box can pay off, as can look beyond the city you’re living in.
We regularly have customers visiting our showroom from outside Manchester. Which makes sense. They’ve come to realise that they can only get these conditions, cars and prices with us.
Unless you desperately need a vehicle straight away, it also helps to keep comparing cars and costs for a while before committing to a deal. But don’t wait around too long: if you see the perfect car for yourself and the price is reasonable, you need to act quick, or else someone else will snap it up before you do.
Speaking of the perfect car for you: You should give this question some serious consideration.
Certainly, if you want to get the cheapest car loans, you need to stop dreaming about Porsches and Ferraris. Be realistic and look at what you need.
The right car should be big enough, fuel-efficient and safe. It need not be bigger than absolutely necessary, though: If the only time four people will be using it is on vacation, you should seriously consider buying a smaller car and taking the train for your holiday trip.
These days, even less popular models can be a great choice. Some brands have a notoriously high depreciation, too. Vauxhalls, for example, can be extremely cheap on the used car market, although they are reliable, fuel efficient and great to drive. Make cars like these your priority.
Sometimes, we will allow customers to buy a car without making a downpayment. But we do this with great reluctance only. The reason why we strongly recommend downpayments is that they make the deal better for both parties.
Downpayments reduce the risk for the lender. This is obviously good for us. But they also reduce the risk of a default for you as a borrower. This is because the downpayment reduces the overall cost of the loan and thereby makes the loan cheaper. On top of that, a downpayment will also allow you to opt for lower monthly instalments, which, as we’ve outlined, is a benefit.
Of course, if you’re strapped for cash, making a downpayment can be hard. But it’s usually not impossible. Put aside some money at the end of each month for half a year. Even if you can only afford something like £150, that still leaves you with close to a thousand Pounds. It may not be a lot. But it will nonetheless help you get a cheaper loan.
We’ve explained that dealers can be great partners for every aspect of buying a car. This seems obvious when it comes to getting advice on which car is best for you. But what about financing?
It may not be intuitive, but one thing we can’t stress enough is this: Today, dealerships are probably able to grant you the best conditions and the cheapest car loans out there.
The way dealers usually work these days is that they set up the loan with a bank in your name. The big advantage of this is that a dealership is a much better lender in the eyes of a bank than you are. This means that they can get a better deal for you and still make a profit.
What’s more, dealers can apply for multiple loans from different customers at the same time. As a result, they’ll benefit from the bigger numbers: A bigger loan should usually fetch better conditions than just a single tiny one.
In the past, dealers were the last option for car finance. Today, they should be your first.
If you’ve followed our recommendations, your chances of getting a very cheap car loan should be pretty high. Nonetheless, it helps to crunch some numbers to find the optimal combination of loan duration, interest rate, downpayment and monthly payments.
Our free car loan calculator is the perfect tool for you. With it, you can play with the variables and explore how changing them yields different results. Most of them will probably not be of interest. But in between them, you can expect some pleasant surprises and intriguing options you may not have thought of.
And this, ultimately, is what the search for the cheapest car loans is all about: Never taking things for granted, always looking for new opportunities.
20 January 2020 Concept Car
