What to consider when applying for new car finance

Financing a car is typically the second most expensive thing you will pay for after either renting or buying a house.

That is why it is important to take each step slowly, taking careful consideration into each part of applying for a deal.

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There are several car finance options available, including Personal Contract Purchase (PCP), Hire Purchase (HP), Personal Leasing or Personal Contract Hire (PCH), and Lease Purchase (LP). With either options there are always a number of key things to do before making a final decision.

Follow these tips on what to look out for when applying for car finance and don't leave any stone unturned:

• Know what your credit rating is before confirming your application as they are a major factor when it comes to finance deals
• Ask yourself whether you can afford the monthly payment with extra to spare in case of an emergency
• Have an understanding of interest rates as they are another key factor when it comes to getting a good finance deal. Compare them by looking at the APR (annual percentage rate), as the APR includes all charges you will be asked to pay. Often a higher deposit rate means a lower interest rate
• You may find yourself being charged extra costs if you ever exceed the forecast mileage in Personal Contract Purchase (PCP) or lease agreements
• When it comes to borrowing make sure to compare the total cost, including all charges over the course of the loan
• Additional expenses may pop up during the term of the loan, so don't forget if you're planning to buy a house or go on holiday when applying for finance

We can help you choose your New Car

For more tips on how to get the best car finance deal visit the Finance Tips section on the MotorPocket blog.