Buying a car is for most people one of the biggest purchases they’ll make, after house buying. However, not everyone has the funds available to buy a car outright and so finance proves a popular option for many.


When you apply to buy a car on finance, one of the first questions you’ll be asked is how much you are looking to borrow.


Whilst this seems like a simple question, there are many factors that can influence the total loan amount you can borrow. Finance lenders will look at your application and consider details such as your credit profile, affordability and income and the deposit you have available (although a deposit is not mandatory). These factors will determine how much the finance company is willing to lend you.


Work out your budget


A good place to start is to work out how much you can afford to spend on your monthly car loan payments. You will need to be realistic and ensure that the payments will not overstretch you. Plus, you’ll need to bear in mind the running costs of the car.


The Money Advice Service provides a useful budget planner on their website, which will help you understand your incomings and outgoings.


When applying for car finance it is vital that you can meet the monthly repayments. Depending on your credit history, you may have to prove that you can do this. This can be done by showing 3-6 months of bank statements and pay slips.


One way to make payments more affordable is to opt for a longer payment term. This does mean that you will pay more interest on the overall amount but will make the loan more affordable on a monthly basis. Bear in mind that the payment term can be affected by your credit profile, and so will be subject to the lender’s criteria.


A car finance broker such as My Car Credit will look at your personal circumstances and make sure that the finance agreement offered to you is one that you can afford.


Know what car you want


Give some thought to what you need the car for, what features you need it to have, whether you want to buy new or used, and what the running costs will be.


It’s important that you are realistic. You may have a dream car in mind but the cost and running costs may not be feasible for your budget. You must avoid committing to more than you can afford as this can cause problems in the future, especially if you do not have savings or your income reduces.


Also, if you try to apply for finance on a car that is outside of your budget, you are more likely to be turned down for car finance, which can impact on your credit file.


The Money Advice Service has a Car Costs Calculator, driven by CAP data, that will help you work out the yearly running costs on the car you have in mind.


You can secure a car loan before you’ve even found a car and if you haven’t found one yet, My Car Credit has a bank of Approved Dealers to search through.


Once you’ve found the car you want, the amount you can borrow will be determined by the value of the car. Some lenders will finance 100% of the value whereas other will lend for more than the value of the car, allowing you to purchase things like insurance, extras, and add-ons.


At My Car Credit, we’re lucky to have a diverse panel of 26 lenders who offer a variety of finance options, including loaning up to 120% and catering for credit profiles that range from excellent to poor, retired people, young people, self-employed, and so on.


Do the calculations


A Car Finance Calculator will provide a monthly repayment figure, an APR, total cost of credit and total amount payable. Whilst your car credit specialist will tailor a car loan deal for your circumstances, the Car Finance Calculator is great for getting a good indication of what you will be able to borrow.


You can access our online Car Finance Calculator here.


If you need any help or advice about how much you can borrow, our Car Credit Specialists can advise you. Just give us a call!