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BUYING a new car is a pretty exciting experience, but budgeting for one is not.

For most, it will involve some sort of finance deal, where an initial deposit is paid, followed by monthly installments over the next two to four years. At the end of the arranged period, you have the option to buy the car or move on, most likely to another finance deal.

You’re probably familiar with your credit score from other areas of your personal finance, but what sort of impact does it have on buying a car?

When it comes to applying for finance, you need to be careful with credit checks.

Like many other areas of personal finance, you’ll need to apply to a lender for an agreement on a car. This will involve the car dealership running a check of your credit history. What’s important is that you don’t engage in too many of these ‘hard’ inquiries, as a lot of them will put a dent in your credit score, making it more difficult for you to apply again.

Eligibility checks, or ‘soft’ inquiries, have no effect on your score, thus are fine to do as much as you please. If, however, you haven’t yet landed on a particular vehicle, be careful as to how you go about checking your eligibility on multiple options.

Different lenders require different criteria to access their best deals, so your credit score will affect what finance plans you can access. Better finance plans may include a smaller upfront deposit, lower monthly payments or lower overall interest, and vice versa for the poorer credit options.

If you go into a car purchase with a very good or perfect credit score, you should expect to get the best deals. Likewise, if you’re entering a negotiation with a poorer score, you need to manage your expectations, or perhaps hold off whilst you rebuild your rating.

A car finance deal is a long-term commitment that comes at a significant cost to you, so it’s important you seek out the best possible deal. If your credit score isn’t allowing you to do that, looking to build a better score before purchasing is a decent idea, if you can afford the time.

Unfortunately, there’s no quick-fix or miracle solution to raising your credit score, it’s a lengthy process that requires you to get your personal finances in order.

Start by getting some credit reports from trusted providers and looking at their recommendations. If you have debts lingering, look at the best ways to pay them off or redistribute them to best appease your credit record. Perhaps consider taking out a credit building credit card to help repair your score.

Once you have your accounts in order and paid on time, plus a few more points on your score, it’s time to return to the forecourt. You may have had to wait longer to get your car, but you can now enjoy the cost and practicality benefits of being a more credible borrower.

In a world where everyone is trying to stay on top of their finances, understanding how credit and car buying works is just another point to consider. In the end, it’s really not too different from other key finance areas. Approach with care, consider all your options and don’t rush into a purchase and you should be just fine.


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