Buying a new vehicle is a big financial commitment and not a decision which should be entered into lightly. If, like most of us, you are unable to buy a new vehicle cash, you’re going to have to consider car finance in order to complete your purchase. Financing a vehicle is often associated with unnecessary problems and a fair amount of stress, too.
But financing your vehicle needn’t be fraught with uncertainty, confusion, or indecision. By acquainting yourself with the appropriate information you’ll find that the process of purchasing a new or used vehicle can be an exciting process. whether you enjoy the process or not hinges on whether or not you’re comfortable with your knowledge of the process.
So, what should you know before you finance a car?
The first and most important question you need to ask yourself is: Can I afford to purchase a vehicle? As important as it is to have your own set of wheels, overcommitting yourself to repayments you cannot afford will only end in disaster. At best, you’ll be able to scrape by and you’ll manage to purchase the vehicle. At worst you stand a chance of having the vehicle being repossessed and destroying your credit rating.
To figure out how much you can afford on a monthly basis use the following simple formula:
Income – Expenses = Surplus
Once you’ve determined what your monthly surplus is you’ll have a pretty good idea of how much you can afford on a monthly basis, but don’t get too excited just yet. Your surplus cash is not the final amount you can spend on a vehicle. You also need to factor in how much insurance you’re going to have to pay on a monthly basis (all financed vehicles need insurance) and you’re also going to have to factor in the monthly running costs of the vehicle, ie. How much petrol will I need? Does the vehicle require any additional maintenance to keep it on the road? Don’t forget that you still need to save on a monthly basis – life happens to all of us so it’s best to stay prepared.
How to go about financing your vehicle:
There are a number of options available to someone looking to obtain finance. You can either:
- Apply for finance online
- Use one of the bank’s pre-approved finance facilities
- Apply for finance at a dealer
- Each of the options outlined above offer their own benefits, however, using an online application will make the process as simple as possible.
Stay tuned for our next article which will cover everything you will need when financing a car.