You may be looking for a car in finance for business purposes. Getting one as a self-employed is a bit tricky but not impossible. It requires you to check on your self-assessments, including every single detail of transactions and revenue statements.
Generally, to qualify for car finance as a self-employed, you must have at least 3 years of business history. The comprehensive operating history helps the lenders gather trust in your ability to pay the dues or deposit in case of bad credit.
You may need a car for multiple things like transferring goods, commuting to the office, contacting client meetings, etc. Whatever it is, before approving the car finance agreement, figure out the parameters that may exceed the total costs of owning a car through finance.
Qualifying for car finance as a self-employed is indeed congratulatory. Do not rush. The blog lists some expenses that come with owning a car. It would help you prepare wisely.
What costs should you be aware of before owning a car?
If you are a first-time car driver, you must be worried about the expenses associated with car finance. You may have queries like:
- How much mileage can I cover? How much will it cost?
- How much deposit can you realistically pay?
- What income proofs can you provide? Will it be sufficient?
- Does having bad credit increase the costs significantly?
- How much will be the maintenance costs?
The blog covers the costs that you may incur while owning a car in finance. Any sole trader, proprietor, company owner or self-employed can benefit from the details below.
Here are some of the costs that you should be aware of
1) MOTs (Ministry of Transport Test)
MOT is a critical parameter of a car’s health. It reveals that the car meets the minimum standards of environment and driving safely on roads. MOT is a must-have if you are buying a used car on finance.. Ask the dealer about the original MOT certificate. It can cost you around £58.85 if it is a car with up to 8 passenger seats. The expected costs mentioned here are per government of the UK.
2) Fuel costs
Fuel prices are on the rise amid the inflation blows in the UK. As per a source, “one spends around £1435/year on re-fuelling the car with an average mileage of 6300-9400 miles/ year.”
The fuel usage depends on the purpose of the car and its usage. For example, if you need a car for meetings, the fuel costs will be lower than using it for transporting raw materials.
3) Car insurance costs
If you are a young driver looking for a car on finance, car insurance can help. However, it may add additional trouble to your budget but safeguard the car expenses. It covers accidental car damage and different types of categories that your car state may fall in. Accordingly, you may get the reimbursement. However, before that, you would be required to pay premiums.
Managing premiums with car finance repayments can be taxing. Thus, decide your budget and the importance of insurance before applying for a car on finance. However, as a younger driver, it is important. Young drivers usually lack sound credit history. Thus, having insurance can be a plus point here.
If you struggle to meet repayments and premiums, check loans for bad credit with no guarantor and no fees from a direct lender and pay your first payment. Check other part-time or full-time job opportunities to ensure a perfect balance.
4) Mileage costs
Certain car finance agreements, like -PCP deals, have a specific mileage limit. If you cover beyond that, the provider may charge you a penalty. Before approving any deal, analyse the mileage limit. If you cross that mileage limit, the company may charge between 3p and 30p per mile.
For example, if you decide to lease Skoda Octavia for 48 months with a mileage limit of 5000 per year and 10p miles less change. It means an annual allowance of £20000 over 4 years. You cover excess miles like- £32000 on record and return the car. Here is how the car mileage can increase overall finance costs:
- Initial deposit: £2400
- Amount borrowed: £14934
- Monthly payments- £266
- Mileage allowed: £20000
- Mileage covered: £32000
- Excess mileage charge: 12000 × £0.10 = £1200
- Total costs of the car finance with additional mileage penalty becomes: £16134.64
While you calculate the mileage permitted, it would be worth checking other travel expenses that you can claim on your self-assessment. You can get an allowance on business expenses like:
- Hire charges
- Vehicle license fees
- Repairs and servicing
- Breakdown cover
- Train, bus, and taxi fare
- Meals on overnight business trips
5) Car maintenance and repair costs
Owning a car on finance comes with liabilities. You may drive the car without owning it outright, maintenance costs may be challenging. “On average, one spends around £1300 annually on car repairs. Costs can be translated into £220/month.”
Here are some ways to save on car maintenance and repairs:
- Do not delay maintenance until the end day
- Keep on with the car’s manual
- Compare the best shops to buy cheap but good quality tyres
- Learn to do simple repairs by your own
- Check whether some original products provide the same quality or not
- Change your oil regularly
- Take care of your car battery
- Warm off the even car 30 minutes before
6) Interest in the car finance agreement
The interest rates usually stay fixed on a car finance agreement. Missing a few payments could up the overall loan costs. Pay the payments and budget accordingly. If you need more cash flexibility, search for an additional income facility.
Missing repayments may increase the interest rates. It may impact finances if you seek self-employed car finance on bad credit. Self-employment usually has uncertainties on financial terms. Explore all your car options and finance amount. Deciding it would help you clock into the right financial agreement.
These are some costs associated with car finance and ensuring a smooth journey. Explore the best car finance quotes and plan your finances accordingly. It would help you analyse the savings you need to ensure for the car payments. Check for the allowance you may qualify for on car finance and reduce the overall costs.