Can buying a car on finance improve your credit score?

If you make your repayments on time your credit score will improve. This is because you are consistently making large payments to repay a loan, which tells your credit file that you are trustworthy and dependable when managing loans.

What is the main purpose of car finance?

The main purpose of car finance is to spread a large cost over the course of many years. Millions of people in the UK rely on a car to go to work, take their children to school and look after family members but not everyone has thousands of pounds saved to buy a car outright. Car finance works to help make vehicle's accessible to all.

Apr 13, 2022

Why Should you Get Car Finance?

There are many benefits to taking out car finance to help you now and in the future.

Buying a car can be one of the most expensive purchases you ever make and for a lot of people, buying outright with cash simply isn't an option.

If you need a car to get to work, take your children to school, or generally get from A to B, then unfortunately you're going to have to make a commitment to buying one.

It doesn't matter if it's brand new or second-hand, it's still going to have an impact on your finances. However, there are plenty of options available and it's up to you to make a decision based on your situation.

Do you currently have a car on finance? Did you know you can get out of it before the contract is up and into something new, potentially saving money? Find out more below.

Even if you do have the money saved up, buying on finance may be a great option to help with your budget flexibility, largely because there are so many different options available.

There are several other great reasons to buy a car on finance and we take a look at each of them to help you if you are wondering if it's the right decision to make.

Won't have to pay a large sum of money

Paying for something in one go is fine if you have the money saved, but what if the worst were to happen further down the line and you lost your job or needed money to repair something in your home?

Having money saved away for a rainy day is critical, and having the option to spread your costs across fixed monthly payments could make it more affordable for you now and in the future.

You can get a better car

Having the option to spread your costs out over many months rather than all in one go at the start gives you the option of getting a more expensive car.

A car worth £30,000 compared to £20,000 upfront is a big ask but spread over 48-60 months and it suddenly looks much more affordable.

Improve your credit score

Making regular monthly payments is one of the best ways to keep your credit rating in good health. Providing you don't miss any payments, financing is a great way to show future lenders that you are reliable and worthy of future loans.

car-buying-on-finance

Better for budgeting

If you have a car on finance, you know exactly how much you're going to be expected to pay per month and when it'll be taken from your account.

This will not only help you month-on-month but will allow you to focus on savings in the future. Being in a strong financial position over halfway through your agreement would give you many different options when it comes to deciding your next steps with your car.

No collateral needed

If for whatever reason you can't afford the repayments during the agreement, you won't lose anything but the car as you have not placed down any collateral.

Obviously, missing payments or having to give the car back early because you can't afford it is bad for your credit score, but at least you won't be expected to give up any extras.

Do you know your car's equity position? Sign up today to see your car finance deal in full and how Car Credible can help you regardless of your position.