5 Car Finance Mistakes You Need to Avoid
Thinking about car finance? Avoid these 5 common mistakes, from monthly payment traps to inaccurate applications, before you sign anything.
Here at carloans 365, we know a thing or two about Car Finance, so trust us when we say “we’ve seen it all”. Let’s face it, mistakes happen to the best of us, but when finance is on the line, it’s not something to approach lightly, especially when they can be avoided when you have the right information and tools to hand.
To ensure you have the right information to make an informed choice, we have curated 5 mistakes we have seen over the years, so you can learn from them before agreeing to a financial agreement. Because one of them could cost you far more than you expected.
In this guide, we cover:
- Not understanding the type of car finance you're taking out
- Focusing only on the monthly payment
- Assuming one decline means you'll always be declined
- Borrowing more than you can comfortably afford
- Providing inaccurate information on your application
Before we begin, it's worth noting that everything in this guide is our own opinion. We're not giving financial or automotive advice, so please do your own research and fully understand the process before agreeing to anything.
1. Not understanding the type of finance you're taking out
You'll come across terms like HP, APR and PCP being thrown around. Let's face it, it's confusing, especially when you're new to this and have no clue what's going on. It's jargon, and it makes your brain hurt.
Thankfully, you don't need to be a finance whiz. You simply need to know what type of finance you're agreeing to and how you're paying for the car.
Before you sign anything, make sure you understand the agreement in front of you.
If you don't understand something, ask. There's no such thing as a silly question when you're committing to a financial agreement. Any business or person handling your application will be more than happy to answer your questions. It's literally their job. If they don't, that tells you something too.
- Explore HP car finance
- Explore PCP car finance
2. Focusing only on the monthly payment
When looking into an agreement, it's easy to fixate on the monthly payment. Which sounds obvious, but you'd be surprised how many people do it anyway.
Sure, £199 a month sounds reasonable. But for how long? 12 months? 60 months? The monthly figure alone doesn't tell you the full story.
The monthly payment is only one part of the deal. You also need to look at the deposit, the length of the agreement, the APR, and the total amount payable.
Ask yourself: "What am I paying overall?" and "Am I comfortable with the full agreement, not just the monthly bit?"
- See our Car finance calculator to learn more.
3. Assuming one decline means you'll always be declined
Being rejected for finance is worth talking about too. Just because you've been turned down once doesn't mean nobody will finance you. If you have bad credit, or you've been rejected before, it's easy to assume the worst, but different lenders have different criteria. That's one reason a broker can be useful.
At carloans 365, we work with a panel of lenders, including some who specialise in customers with less than perfect credit. But acceptance is never guaranteed. A broker can explore your options, but the final decision always sits with the lender.
If you're rejected and want to try again, it's worth considering the impact on your credit score first. Every lender is different, so do your research before reapplying.
- Check out our Bad Credit Car Finance Guide to learn more
4. Borrowing more than you can comfortably afford
Another common mistake is borrowing more than you can actually afford. Just because you've been offered finance for a more expensive car doesn't mean you should take it. Factor in everything that comes with car ownership: MOT, insurance, and even the costs you can't predict. It might look affordable on paper, but once you add it all up, is it really?
5. Providing inaccurate information on your application
When applying for finance, always be honest. There's no point trying to make your application "look better," as it will catch up with you later. The best approach is to be upfront, so you end up with the option that actually fits your circumstances.
Incorrect information isn't worth the risk.
So, those are 5 mistakes you need to avoid when looking into car finance. Again, this is our opinion, and you should always do your own research to make an informed decision.
More from us
Got a question? We’ve got answers. Our team is here to support you and answer any questions you might have, so why not get in touch with us? We’re more than happy to help.
Whether you're new to car finance, looking for a used car, or weighing up your options after being declined, this guide gives you some useful points to consider before making an application.
carloans 365 is a credit broker, not a lender. We work with a panel of lenders to try to secure you an approval. Finance is subject to status and terms and conditions apply.
