When you buy a car on finance, you will have to pay certain fees and charges. The two main costs are the deposit and the monthly repayments. Before you start to make your monthly payments, there are some other costs that need to be considered first. Today we’ll break down all of the costs involved with financing a car so you can decide if it’s the right option for you.
Monthly repayments
As with any loan, your monthly repayments will be subject to interest rates. This means that the higher the APR (annual percentage rate), the more you will be required to pay per month in order to make full repayment of the amount borrowed before the end of your term. It’s worth noting that paying off a smaller amount each month will result in a higher amount of interest being paid.
Deposit
While this isn’t always a necessary part of getting a car loan, you might decide to put a deposit down on the loan. This can often range from 2-20% of the cost depending on how much risk the lender is taking and what your credit score is like (if you have a bad credit score, then expect to pay higher interest rates). Putting a deposit down has the effect of reducing the amount you have left to pay down the line.
Lender fees
Some lenders may either charge you a fee or offer you fee waivers. Fees are usually considered to be anything that costs the borrower money while fee waivers are fees that will be waived if certain conditions are met. These can include paying your loan on time, getting automatic payments set up with your bank account, and having enough money in your account when it comes time to pay off your loan.
The fees your lender might charge include late repayment fees, monthly fees, early repayment fees and early exit fees.
Every lender charges fees, so it’s important that you’re across these before you decide on a lender. When you get car finance quotes with Driva, they’ll let you know exactly how much each lender will charge in fees, so there are no surprises down the road.
Ongoing costs of running a car
In addition to all of the loan costs, you’ll also need to factor in the ongoing costs of owning and running a car. These will likely include things like registration, insurance, petrol, repairs and maintenance, toll road costs and roadside assistance. If you’re planning on getting a new car, then you’ll also need to include the cost of registration for this.
While it’s not possible to put an exact figure on what these costs will be over the lifetime of your loan and car, we can say with some level of certainty that they will add up. It’s advised that you budget for these costs when finding out how much you’ll need to pay each month so that you can afford them.
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