They are what we all reach for, but the finer things in life usually cost money. If we don’t have it, we can save it or we can borrow it; that’s normal. For example, in 2015, the percentage of people who financed a car purchase rose from 45% to 75% thanks to new ways of buying or leasing. The trouble is, borrowing money comes with the twin burdens of risk and responsibility.
The days of sitting meekly in an office while a gloomy bank manager peers at you, often over a set of severe spectacles, are long gone. These days financial decisions are made in a much more scientific manner. The individual credit score. How we handle our money is down to us.
As you no doubt know, credit scoring works by utilising a set of determining factors. This score will then be used to decide whether the borrower is a safe bet and will be able to afford the repayments of a loan. Or not.
The Determining Factors
The overarching determinant is how an individual has conducted financial matters over time. If a person isn’t one to borrow and likes to stay within personal income levels, that’s fine but it gives no clue how that person would handle debt.
Thus a borrower who regularly uses credit, manages well and makes repayments on schedule will, over time, be seen as a good risk and thus worth lending to at relatively low rates of interest.
This doesn’t however preclude people whose credit history is less than squeaky clean. Sometimes things don’t work out for the best. It may still be possible to obtain a loan but the apparent attendant risk will probably generate a deal at a higher rate of interest. Thus if money is borrowed to buy a new car, the credit score will be the arbiter of interest rates.
Buying A Car
Forward planning; that’s the key to getting a good finance package on a new motor. The first step should be to approach an ethical and established credit reference agency who provides, ideally, a free-forever easy to access credit score. That’s your starting point.
You may well have a highly creditable score which means all that follows will be plain sailing. A low score should give you pause for thought.
Take a look at the chart at the bottom of this page. It gives, in a nutshell, best and worst case scenarios for a five year deal on a vehicle purchase based on Top Gear’s hottest automotive tips for 2017. It speaks for itself.
Look at the interest a high risk borrower would have to stump up! It just isn’t worth it. The obvious answer is for our potential buyer to take a step back. To get a good deal, first you have to work to help yourself.
Achieving The Automotive Aim
Initially, consult the credit reference agency to find out how to clear up anything that might be having a negative effect on your financial history. They are there to help.
“Car finance deals are more popular than ever”, says Justin Basini, CEO at ClearScore, “and can be a great way to make your dream car affordable. One way to improve the deal you’re offered is to choose the car you want a few months in advance and work hard on improving your credit score before applying for finance. A high score can reduce the cost significantly”. Wise words.
Cutting The Cost
Did you know that some months are better than others when buying cars? Car dealers usually have quarterly targets to meet and the month ends of March, June, September and December are often the time when sales assistants are likely to offer better rates to improve their bonus performance.
Try not to pay list price. Some publications suggest ‘target prices’ which, with a bit of front from the buyer, can often be achieved. Online brokers are an alternative way forward here.
Cars with a manual gearbox are routinely cheaper than automatics and, usually, petrol cars are cheaper than diesel. It’s about considering what is really needed. If a buyer is prepared to accept a pre-registered car that doesn’t necessarily have all the bells and whistles originally desired, then there’s a definite deal to be struck – and you get your car quicker!
You Know It Makes Sense
Around seventy to eighty percent of car buyers purchase on credit. The higher your credit score the better the finance deal will be. It serves no purpose to try and cut corners and it definitely isn’t an advantage to ignore the issue.
Credit Scoring can seem impersonal and remote because it doesn’t necessarily take into account those small things that are important to us as individuals. That’s the way the money world works though and it will pay to go along with it. Approaching a credit reference agency is simple, quick and helpful; it’s your jumping off point to a new car loan at low rate of interest. Must be worth a look, surely?
|TOP GEAR’S HOTTEST CARS OF 2017 + APPROX PRICE||INTEREST YOU WILL PAY OVER A 5 YEAR PERIOD IF YOU HAVE A HIGH SCORE
*based on a 10% deposit over 5 year loan with 5.9% APR
|INTEREST YOU WILL PAY OVER A 5 YEAR IF YOU HAVE A LOW SCORE
*based on a 10% deposit over 5 year loan with 31.6%
|Alfa Romeo Stelvio (£35,000)||£6,274||£32,828|
|Mazda CX-5 (£23,000)||£4,131.04||£21,616.25|
|Mini Countryman 2017 (£22,465)||£4,033.76||£21,104.26|
|BMW X2 (£30,000)||£5,378.34||£28,139.02|
|Renault Alpine (£50,000)||£8,963.90||£46,898.36|
|Mercedes-AMG GT Roadster (£100,000)||£17,927.80||£93,796.73|
|Telsa Model 3 (£35,000)||£6,274.73||£32,828.86|
|Peugeot 5008 2017 (£24,000)||£4,287.38||£22,425.21|
|Land Rover Discovery 2017 (£43,495)||£7,775.66||£40,672.57|
|Vauxhall Insignia Grand Sport (£18,200)||£3,283.29||£17,182.41|