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How to lower car finance costs

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Owning and running a car can be expensive and getting a car on finance can be a great way to spread the cost of your car into affordable monthly payments. There are a number of car finance agreements which can suit individuals with different circumstances. Car finance doesn’t have to be confusing but choosing the wrong agreement or not doing your research first, it can cost you more than it needs to. There are a few factors which can affect the cost of your car finance agreement. The guide below has been designed to help you explore how you can keep car finance low and avoid paying more than you need to.

How to lower car finance costs

Which factors affect the cost of getting a car on finance?

The cost of car finance can vary based on a few factors and some can make the price of car finance vary massively. The below factors can determine how much you will need to pay back.

  • The cost of the car

  • Your credit situation

  • Length of the finance agreement

  • The type of car finance agreement you choose

  • Your deposit contribution

How to keep car finance costs low:

If you’re looking for an affordable car finance deal, there can be many options available to you. However, it’s worth knowing how to reduce your car finance costs and help get the cheapest deal possible. 

  1. Put a deposit down

Within car finance agreements such as hire purchase, the more you put in for your car finance deal, the less you have to pay back. A deposit contribution can help to lower your loan amount and make your car finance deal more manageable. Some agreements also required a deposit to be put down in order to secure the finance so it’s worth considering before you start applying for finance.  

  1. Apply with someone else 

If you want to keep your car finance costs low and are struggling to get approved on your own, you could consider a joint car finance deal. A joint agreement is when two people, usually a couple, apply for finance on the same car. Both parties will be responsible for meeting the repayment deadline and it can help to reduce costs as you don’t have to pay the full amount yourself. Instead, you and your join applicant split the cost, and both have ownership of the same vehicle. 

  1. Compare interest rates

Your car finance interest rate determines the cost of borrowing. If you have a low credit score, the cost of borrowing can be higher as you are more of a risk to lend to. A higher interest rate can mean you pay more back than you need to so it’s a good idea to shop around for the cheapest interest rate possible to stop you from paying back more than you need to. 

  1. Improve your credit score

If you want to help lower your interest rate offered and also increase your chances of getting approved for car finance, you could consider increasing your credit score before you start applying for finance. You can do this by reducing any existing debt you have, paying all your current bills on time and in full, keeping your credit usage low and not taking out any new credit.

  1. Refinance your current loan

If you’ve taken out a car finance deal already and are looking to lower your costs, you could consider refinancing your current loan. Refinancing a car loan is when you replace your current deal with a new one with better terms and lower rates. Within a PCP agreement, you can also choose to refinance a balloon payment if you can’t afford to meet the large final payment.


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