Roughly two million cars were purchased using car financing in the first half of 2024, and it isn’t difficult to see why. As new and even used car costs continue to rise, the opportunity to spread auto expenses across a set term is invaluable for many of us.
Unfortunately, with financing deals often costing as much as £400 a month, it would be a stretch to call this a strictly frugal option. Many car owners constantly push themselves to meet these steep payments, and that situation is only set to worsen as costs rise.
If that thought makes you hot under the collar, then fear not. We’ve got some great suggestions for keeping those monthly costs down as much as possible.
1 – Choose Longer Lease Terms
Most car financing deals, particularly hire purchase (HP) and personal contract purchase (PCP,) are available across pre-agreed terms that could last for anything from 12 months to five years. The longer term you agree to in advance, the lower your monthly payments will ultimately be. Of course, it’s worth sticking to a shorter lease if you don’t want to keep that vehicle in the long run. However, if you’re committed, you can keep monthly costs down a great deal by simply choosing the loan with the longest available term. This might not save you money on your car overall, but it will help every month.
2 – Refinance Your Car Loan
If your credit score has improved since securing your finances, it may be possible to refinance your car loan to secure lower interest and thus lower monthly payments. Admittedly, this won’t be an option with a lot of pre-agreed car finance deals, but it is worth asking about your options. It may be that you can either refinance or start a new financing plan that costs you less overall. This tends to be particularly possible during a PCP loan, as your finance provider can pay off your existing deal and effectively start from scratch. Do note, however, that you may end up paying more overall despite lowered monthly costs.
3 – Find Out if You’re Owed a Claim
As regulations around car finance tighten, many owners are realising that they’ve been mis-sold finance options like PCP. This is especially true for owners of certain car makes, with owners increasingly able to receive lump sum payments during Mercedes, Honda and Ford PCP claims amongst others. Of course, this in itself is unlikely to help your payments as they stand. However, with many car owners claiming back thousands, you could use this money to either overpay and end your finance term sooner or to spread across monthly payments that feel like far less of a financial hit.
Takeaway
Car financing has become vital on the path to vehicle ownership, yet steep monthly costs mean that these agreements can take a severe financial toll. Are you fed up with scraping your cash together in time for monthly cut-off dates? Try these tips for keeping monthly costs down.
This is a collaborative post.