Car owners are used to dealing with costs coming in a seemingly unstoppable barrage, but car financing is the one that deserves most attention, not just your fuel and insurance costs. Over 80% of all car owners are on a personal contract purchase agreement. But it’s safe to say that 80% of PCP contract-owners don’t get the best deal out of it that they can. To stop yourself getting involved in a contract that eventually has you spiralling into serious debt, there are a few steps to be conscious of.

Know what’s available

When it comes to taking out a car loan, perhaps the worst thing you can do is start with the very first offer that gets floated your way. Often, it’s a dealership attempting to get you to finance a car with them. Instead, find out how much exactly you have to play with and what kind of payment plan you can expect by getting your loan pre-approved. See if there are any specific rates for you, too, such as the car loan options available for younger people. There are a lot of outward circumstances that can affect the deal you take, so be thorough in thinking about which might work in your favour.


Increase your down payment

All loans begin by putting forward a down payment. Many hopeful future car owners get into a deal as soon as they have the minimum down payment ready, or they choose to pay the minimum. That is an easy way to get yourself a long-term agreement you have trouble keeping up with. Save up for a bigger down payment. If you can’t wait and you need a car, then consider quick loan providers like New Horizons to give you the cash injection you need. You might be paying more immediately, but you could use the period before your car loan repayments begin to deal with that first loan and end up with a much more manageable repayment plan for the rest of your ownership.

Know the real costs

Don’t be tricked by the big numbers that certain car finance providers will be throwing at you, either. As Money Advice Service suggests, you need to often do your own math to find out what a loan really means. For instance, the APR is an important part of getting an accurate report , representing not just interest but the fees that you accrue on the loan as well.

Ending the contract

If you’re deep into a contract that you’re no longer able to afford because your circumstances have somehow changed, then you still have an option. You can undergo a voluntary termination of your PCP if you have paid more than half of it off. Loan companies don’t like this and your credit might take a bump, but if your current ownership agreement is unmanageable, it might be your way out.

Car financing is a big step and it’s the one most car owners are likely to take when getting a car. However, there’s a lot more wiggle room than you might imagine. Know what you’re getting into, know how you can affect your payment plan, and know how to get out of it if you need to.