Managing your car finance effectively is essential and not just to avoid financial stress, but to ensure you’re making the most of your money. Whether you’re on a personal contract, purchase, hire purchase or a lease deal, staying on top of your finances can help you to avoid any unnecessary charges while getting better deals in the future. The rising cost of living has meant that car owners across the UK are re evaluating their financial commitments.
The good news is that a little knowledge can go a long way. From reviewing your contract to exploring end of agreement options, we’ve got some of the best ways that you can manage your car finance wisely.
Check for PCP mis-selling.
If you took out a personal contract purchase agreement in recent years, it’s always worth checking whether you’ve been misled to finance. A lot of drivers were not properly informed about the full cost of their agreement, the interest rate, or the commissions being paid to the dealer. And if this sounds familiar to you, you may be able to make a claim.
Black Horse car finance claims are currently being investigated alongside other finance providers as customers have raised concerns about whether they were given clear and fair advice at the time of purchase. The first step that you have to take is to dig out your original agreement and check what you were told about interest rates, Commission and the final balloon payment. If anything feels unclear to you or feels misleading, then it’s important to consider speaking with a claim specialist or a financial advisor who can assess whether you might have a valid PCP mis-selling claim.
Understand the agreement that you’re on.
Before you can be effective in managing your car finances, you need to know what kind of deal you’ve been signed up for. The most common types in the UK are personal contract purchases, where you pay monthly installments, then choose to buy the car, return it or part exchange it at the end. Hire purchase, where you pay fixed monthly payments and own the car outright once the final payment is made, And personal contract hire, which is where you pay to use the car for a fixed period but never own it. Every option comes with different responsibilities, advantages, disadvantages and end of contract conditions. You should insure exactly what you’ve agreed to and your understanding behind it. And especially when it comes to mileage limits, excess wear and tear charges and final payments.
Remember to budget for all car related costs.
It’s so easy to focus on just that monthly car payment, but running a car involves several ongoing costs, much like it does when you’re paying a mortgage. When managing your car finance, you have to make sure that you’re budgeting for your insurance premiums, road tax, MOT costs, fuel or charging costs, repairs and maintenance. It’s also smart to set aside a small emergency fund for the unexpected expenses, such as fixing your car if it breaks down and is not covered by your insurance. Keeping a full picture of your total car related costs can really help to avoid those nasty surprises and keep your finances in check at the same time.
Keep an eye on your credit score.
The credit score that you currently have affects the kind of finance details that you’re eligible for and whether you’re looking to refinance or get a new vehicle. A good score will mean a better interest rate and more flexible terms in the future. You can check your credit score for free using services such as Equifax or Experian. If your score isn’t where you want it to be, you can improve it by keeping your credit card balances low, paying your bills on time, and avoiding multiple hard credit checks in a short period. Staying credit savvy can make all the difference when it comes to staying in control of your car finance and planning your future purchases more affordably.
Think about refinancing.
This will very much depend on whether or not the interest rates are high. If your current car finance deal comes with a higher interest rate and your credit has improved since you took it out, then refinancing could well be an option for you. This means taking out a new finance deal to pay off your existing one and this article will come in handy to help you to understand how to manage that. Refinancing could reduce your monthly repayments at a lower interest rate or help you to pay off the car sooner, but you have to be sure to consider again any early repayment charges or fees. Compare car finance deals as much as possible and speak to an advisor if you’re unsure whether refinancing would be good for you.
Watch your mileage.
If you’re on a lease deal or a PCP, then it’s usually important to note that there may be a mileage cap written into your agreement. Going over this limit can lead to huge excess mileage charges at the end of the term because this is not your car. To avoid unexpected costs, track your mileage regularly and be honest with yourself about your driving habits if you think you may exceed the agreed limit. Contact the provider early so that you can look at the top up options that are cheaper than paying the penalty later on.
Know what your end of term options are.
As your agreement for your car nears its end, you need to decide what you should do next, especially if you’re on a PCP or a lease. You could pay the balloon payment and keep the car. You could hand the car back as long as it’s within the agreed condition and mileage, or you can trade it in for a new deal using positive equity. Take the time here to weigh up the finances and the condition of the car and whether you’d prefer to keep or change your vehicle. If you’re not sure, then get the car valued and compare what it’s worth against the balloon payment. If you’re on a higher purchase, you’ll own the car once the final purchase is made, so consider whether you should keep it, sell it privately, or use it as a part exchange.
