Things to consider before buying a car with a loan

Before you make a finance application or commit to buying a car, there are a few questions to ask yourself. This will help you understand if you're making the right decision, and can afford not only any loan repayments, but all the costs that come with owning and running a car.

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1. What will the car cost to run?

A car costs more than just the number on the price tag so before buying your vehicle, it’s important to weigh up related costs of running it. That £1,500 bargain quickly turns into huge investment if it costs a lot to insure, gets few miles to the gallon, and fails its MOT every year!

Compare insurance quotes for the make and model of any car you’re considering purchasing, factor in road tax and a fixed amount to set aside for potential maintenance and repairs, and think about how much petrol you’ll get through each month for an indication of your running costs. There are calculators online that can take some of the legwork out of this if you have the basic information to hand.

 

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2. How much can you afford to pay back each month?

Before you borrow any money it's important that you know how much you can comfortably afford to pay back.

Look at your outgoings, and work out:

  • how much do you have left over after essential spending and the car running costs
  • make sure you still have a buffer for those months where everything is a bit more expensive!

Responsible lenders won’t give money to applicants they don’t feel can afford it, but even if you do pass the affordability checks, it’s important that you’re happy with the amount you’re asked to repay each month.

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3. Is the car worth the asking price?

Now you've worked out how much you can afford to spend on a car, it's time to turn your attention to how much the car you're after actually costs. No matter how you're paying, you want to make sure you're getting a good price.

We all know that cars depreciate in value based on age, miles on the clock, condition and more. With so many factors at play, it can be difficult to determine, based on viewings and test drives, whether or not a car is truly worth what the seller wants for it.

Before you jump in and make an offer, be sure to do your research. Look up what similar makes and models have recently sold for, and use a tool such as RAC’s ‘Value My Car’, which takes basic information to give you an idea of how much a vehicle is actually worth. If you’re buying a used car, the price will often be flexible, so once you’ve done your homework, don’t be afraid to bargain if you feel the asking price is too high.

4. How much cash do you need?

Once you have an idea of how much your car will cost to run and are sure you’ll be making a good investment, it’s time to think about how much cash you need to raise. Do you have enough money to cover some or all of the cost yourself, or will you be borrowing the whole amount?

This is where we come in. If you opt for a low cost personal loan to finance your car, and are approved, we could lend you between £7,500 and £10,000 from 3.5% APR Representative.

When you know how much you need to borrow, use our car loan calculator to work out how long you should borrow over, and how much interest you’ll pay.

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Representative Example: Loan amount; £10,000, Term; 48 months, Monthly repayments; £223.32, Total amount repayable; £10,719.36, Cost of credit; £719.36, Interest rate (fixed); 3.4%, Representative 3.5% APR.