Considering A New Car Loan
Every year, millions of people trade their cars in for a newer model and for most drivers they will consider taking out a car loan. Even in these years of austerity, people have not slowed down with their new car purchases. In fact, in 2012, sales of new cars hit their highest level for four years, with over 2 million units sold.
That represented a 5.3 per cent year-on-year growth, with the surging private sales market – up 12 per cent – providing much of the impetus.
In many ways it makes sense. Holding onto an old car is not necessarily an economical decision, with servicing and insurance costs increasing with age and many newer models offering significant savings on fuel economy and, in many cases, road tax.
What is more, with interest rates still at record lows, the availability of great-value car finance is wide. Affordable and flexible car credit can make a financially daunting prospect such as buying a new car much easier to stomach with a car loan. Read on for advice on how you can use credit to your advantage when upgrading your car and obtaining a car loan
Free-up Cash For A New Car Loan
If you have bought your car outright, or have fully paid off the car loan on it, selling it and purchasing your next car with a car loan could release a sum of money that could be put to good use.
When buying a replacement, use some of the sum as a down payment – significant enough to achieve more favorable repayment rates – and, making the most of the affordable finance in the current market, divert some of your monthly income to paying back the rest of the car loan over the full extent of the finance term.
Depending on your original car’s sale price, you could be left with a windfall that could resolve any pressing financial matters – school fees, necessary property maintenance costs or mortgage deposits etc. – or give you enough to treat yourself to that holiday you always wanted.
Smaller Car = Smaller Car Loan
If you are already paying monthly instalments on a car loan, you could make savings by trading it in and opting for a less expensive car. Price is not a guaranteed indicator of performance, so it may well be possible to buy a larger, faster, or more economical car than you currently own for less money.
Ascertain your loan value and compare it to your car’s trade-in value. If the value of the car exceeds the loan value this is especially wise as you can pay off the car loan and retain an amount as a down payment on your next car loan, which you will be making lower monthly repayments on.
Even if your car loan value exceeds your car’s value you could be in luck. Look at your monthly repayments and the length of your unexpired term to work out what you will end up paying on your car. Then compare that to the costs of making up the shortfall between the car value and the car loan value, the size of the down-payment you intend to make and your prospective monthly repayments. The second figure could still work out cheaper. Always make sure that before you obtain a new car loan that you can afford it and it will not leave your finances stretched.