Many of us choose car finance to help us buy or lease a car if we don’t have a lump sum of cash to make an upfront purchase. In 2022, economic issues have had an impact on the cost of goods and services, meaning we are having to stretch our money to cover the increasing cost of energy bills and fuel. This will, without a doubt, have an impact on the number of people choosing car finance and will result in lenders being more careful when it comes to approving applications. If you have struggled to be approved for loans in the past, car finance bad credit gives you the chance to be accepted for finance, regardless of your credit score. Read on to find out more about how the cost of living is affecting car finance.
Driving and the cost of living
This year, we have seen the cost-of-living skyrocket and our personal finances continue to take a hit as we try to make our money go further. We’ve seen the price of petrol reach record highs over the past year, which has panicked many of us up and down the country. With so many of us relying on a car to get from A to B, it is worth looking at how running your vehicle, filling it up and paying for it, is going to be affected by the rise in the cost of living. Below, we’ll look at the impact that the cost of living is having on car finance, as well as some of the advantages and disadvantages of having car finance in this increasingly difficult time.
Car finance is used as an alternative way of buying a vehicle. If you don’t have the money to pay for a car outright, choosing a finance option means you have the chance to pay it off in more affordable instalments. You may be asked by a car dealership to put a deposit down on a car to determine your payments – having a small deposit put to one side for your car means your monthly payments are likely to be less. You can choose options in which once your car is paid off it is yours to keep, which is known as a hire purchase, or you can choose a PCP agreement which means you pay instalments off the car, and when the loan term comes to an end, you give the car back or choose another and the finance begins again.
Car finance is useful if you don’t have a lump sum available to buy a car, as you can choose a reliable, new model and pay it off in more affordable monthly payments. If you haven’t got money saved but need a car to get around, you can take advantage of the deals that various car dealerships may offer you to seal the deal. If you’re saving for another life event, like getting a mortgage or retirement and you don’t want to spend your savings on a car, finance may be the best option.
Another knock-on effect that the current economic crisis is having is that more of us are holding onto our cars instead of selling them, which means used cars are going up in price. If you think you can afford it, car finance may work out as a better deal than waiting to buy a used car that may be priced higher than it should be!
Unfortunately, as the cost of living continues to rise, more of us will be put off taking out car finance as it will be another monthly bill to try and manage. Many of us are struggling with the rise of energy bills as well as goods and services, so it is important that we take care of our finances and decide what we can really afford. If you are planning on taking out a car on finance, you should budget wisely and make sure you choose a model that is within your price range.
As well as this, finance lenders will become more stringent as the cost of living crisis worsens. Rigorous checks are needed when anyone applies for finance, as a way of ensuring that the customer can afford the amount they are applying for. To get yourself to the best position to be viewed positively by lenders, you should check your credit report, and consolidate your debts to show you are trustworthy.