How to Finance Your First Car

While there’s no doubt that passing your driving test remains a significant rite of passage, it may be difficult to invest in your first car.

After all, even used car costs are increasing markedly as supply chain issues impact the production of new vehicles, while rising fuel duties, costs and insurance premiums also have an adverse effect on new motorists.

So, how can you go about financing your first car, and what are the key considerations when you enter the marketplace?

#1. Define a Budget

Let’s start with the basics; as you cannot realistically look to finance your first car without first defining a clear and manageable budget.

This will also raise a number of additional considerations, such as the type of car that you need and its likely maintenance costs.

Once you’ve determined such criteria, you’ll need to determine precisely how much you can afford to spend, before targeting relevant vehicles that fit within this budget.

Remember, financing options will see you make monthly repayments over a fixed number of years, so you’ll need to calculate such liabilities and the impact of interest to ensure that you can meet your financial requirements over time.

#2. Should You Opt for Finance or Another Payment Option?

Of course, finance options can be relatively complex and represent a sizable commitment, while such an agreement may not be available depending on your credit history.

In this instance, you could seek out a low cost bad credit score loan, and one that enables you to cover a large initial cost while replicating manageable monthly payments and interest.

A much easier solution (especially when investing in older used cars) is to use accumulated savings, enabling you to complete a simple, single purchase that completely negates the impact of interest.

Hire purchase and so-called “personal contract purchase” agreements are also available, although once again, these are only available to customers with good credit histories.

#3. Factoring in the Additional Costs

On a final note, you’ll need to fully factor in the additional costs associated with buying and owning a car, especially when compared to public transport usage.

For example, you’ll have to insure your car, while insurance premiums are notoriously high for newly-qualified drivers and particularly those who are aged 25 or under.

Then you’ll need to consider fuel duties, depending on the type of car that you buy, the frequency with which you intend to drive and the impact of levies that have been designed to encourage the use of electric or hybrid vehicles.

When driving to and from work, you may also have to consider the cost of parking, which can be especially high in bustling city locations such as London and Birmingham.