Finance plans are a hugely popular route to car ownership. Products such as Hire Purchase (HP) plans and Personal Contract Payment (PCP) loan arrangements allow many people to buy a new used car with a finance agreement tailor-made for them. At Carbase, our car finance plans offer great flexibility and thanks to our core values of transparency and fairness, won't tie you into a financial plan that stretches you too far.
So how do you budget to buy a used car on finance? These tips can help you set a budget that will get you back on the road without restricting your spending.
The first thing to look at when budgeting for car finance is your month to month expenses. If you don't have one already, draw up a household budget including your income after tax and all your outgoings, from the big monthly expenses to the small incidentals. Don't forget to consider the additional costs of owning a car, such as the deposit (a higher deposit will usually mean lower monthly repayments), car tax, insurance, fuel and maintenance. Look back at the past six months to year to give you an accurate picture, this should give you a good idea of how much you can afford on monthly repayments.
It is possible for us to provide car finance deals with no deposit however you'll need to ensure you can afford the monthly payments as part of your overall budgeting plan.
Remember, if you're planning on cutting back on other expenses to fund the finance plan, make sure you're honest with yourself. Setting unrealistic targets for spending can cause problems further down the line, and missing monthly repayments can ultimately result in the loss of your car.
Resist window shopping
It's very tempting to look at the wealth of used cars available, but try to refrain until you've done your homework and you know how much you can afford to repay each month. Finding your dream car before you've done this may tempt you to stretch your budget too far to afford it, rather than finding a car that suits what you can comfortably afford to spend.
We can help you shop within your budget so that you come away with a great car and more importantly, without that nagging feeling that you've bitten off more than you can chew.
Be aware of all the costs
Once you have found the used car for you, familiarise yourself with any additional costs and optional extras that your plan may include.
If you opt for a PCP finance plan, make sure you don't underestimate any forecast mileage agreements, as you can be liable to pay a fee at the end of the plan if you exceed the number of miles projected. The same applies if you return your car with any damage not deemed to be expected 'wear and tear'.
You may want to consider adding insurance policies to your plan, such as GAP and/or RTI insurance. Guaranteed Asset Protection (GAP) insurance comes into effect in the event of the total loss of your car; for example, if it is stolen or written off. GAP insurance covers the difference between the current value of the car at the time of loss (as would be paid out by an insurer) and the amount you paid for it at the time of purchase, or whatever is left to pay. It's designed to make sure you don't lose out financially in the event of total loss.
Return-to-invoice (RTI) insurance is a more specific type of GAP insurance and is designed to subsidise the amount you would receive from your insurer in the event of a total loss, back to exactly the amount you paid for the car at purchase.
There are also options to add an extended warranty and/or paint protection to your used car purchase, should you wish to.
At Carbase, we'll talk you through all of the extra costs your chosen used car finance plan includes, making sure you're completely comfortable before finalising your purchase.
If you are thinking now is the time to get your next used car, why not upgrade to a Carbase car and come and see us today.