If you have a poor credit history you may need to do whatever you can to make ends meet. But owning a car can be an essential part of everyday life and something a lot of us can’t live without.
New cars are notoriously more reliable, safer and better equipped than used cars, but this usually comes at a much higher price.
With many options on the market now, it is possible for you to get a new car on finance, even with bad credit. But is getting a brand new car really the right option when your financial situation is not in the best shape?
Bad credit car finance broker
If you have bad credit then getting any type of finance can be a struggle, especially car finance. Your best chance is to choose a bad credit car finance broker such as Red Potato.
As both a car broker and dealership that specialises in helping those with bad credit, most of the time we would recommend choosing a used car over a brand new one if you’ve had financial difficulties. That being said, everyone’s circumstances are different and should be treated individually. Here we have provided further information on new and used cars so you can make the right decision.
High chances of rejection
Mainstream car dealers generally cater for people with good to excellent credit ratings. This means that the rates they offer for finance on new cars will be set for this market. Unfortunately, these rates are unlikely to be applicable for anyone with a poor credit history. Because of this, it’s unlikely these lenders will consider your application at all.
Marks on your credit file
You should be aware that each time you apply for finance it will leave a mark on your credit file. Although they can’t see the outcome, if lenders see several applications within the same time frame they might perceive this as a desperate need for funds. This might lead to your application being rejected. To increase your chances at approval you should avoid making multiple applications at once. If you’re certain that you want to buy a brand new car then you might want to consider improving your credit rating beforehand.
The financial burden of a new car
Unless you have a substantial deposit, getting a brand new car on finance can be a huge financial strain. As the cost of a new car is considerably higher than a used car, your monthly payments are likely to be more. If you are approved then you will need to make sure you can comfortably afford the monthly payments on top of any other financial commitments you have.
New car depreciation
You will also need to take into consideration the depreciation value of a brand new car. According to The AA, the average new car loses up to 40% of its value in its first year. So when you do choose to sell, it’s likely you will make a considerable loss. Many people who opt for a brand new vehicle choose to take the car out using PCP (Personal Contract Purchase) or through a lease as these options can help to bring monthly costs down. The downside is that you won’t necessarily own the car at the end of the agreement. Here we have created an article to help you to compare different car finance options.
Do you really need a brand new car?
When you have bad credit you really need to consider your financial situation before you make any purchase. This often means making more cost-effective decisions that will ultimately help you get back on track.
The biggest question you need to ask yourself when car shopping is “do I need a brand new car?” It’s likely that the answer is no.
A used car from an approved dealer will most likely provide you with the same essentials as a brand new car. Of course, you will need to consider MOT, servicing and extra maintenance costs that you may not have to with a brand new car. However, when compared to the cost of purchasing a brand new car, these are relatively inexpensive.
An approved used car is likely to give you a more cost effective deal, no matter how you decide to finance it.