Car finance is a great way to spread the cost of owning your next car and for many people it means getting a newer car than you may have first thought you could afford and paying for it in affordable monthly repayments! The lifespan of your car could be coming to an end or you just simply need an upgrade, whatever your need for a new car, car finance can be a perfect fit. If you’ve never taken out car finance before or haven’t done enough research, then you may be wondering how you can get the best car finance deal for you. Not all types of car finance suit everyone and depending on your circumstances you could be more likely to be accepted for a certain type of finance agreement than others. Let’s take a look at some simple ways in which you can get the best car finance deal for you.
Check your credit score
It’s a common car finance myth that you can only get accepted for car finance when you have a good credit score. However, there are many options available to for people looking for car finance with bad credit. Having a better credit score means you will usually benefit from lower interest rates and monthly payments, so it is recommended that you check your credit score before applying for finance. You can use a credit referencing agency who will provide your full credit report for free, and you should get into the habit of checking your score regularly and fixing any mistakes on your credit file.
Types of car finance deals
In the UK, there are 3 main types of car finance that are the most popular but it is worth researching other options such as leasing and hiring vehicles. The three main car finance deals are a personal loan, Personal Contract Purchase and Hire Purchase car finance.
A personal loan can be used for pretty much anything but are usually harder to get accepted for, unless you have good credit. If approved, the amount you borrow is deposited into your bank account and then you make fixed monthly payments with added interest till the end of the agreed term. You then have the flexibility to get the car you want from a dealership or private seller and own the car from the start.
A Hire Purchase finance deal is a type of car finance agreement which is secured against the vehicle. Monthly payments for hire purchase deals can usually be a little higher than others as you spread the cost of the car into monthly payments with interest. Then once the final payment has been made, you become the legal owner of the car. It should be noted that the finance company will own the car during the agreement and if you fail to meet your repayment schedule, they can take the car off you.
Personal Contract Purchase
Personal Contact Purchase is similar to Hire Purchase, but you won’t be paying off the full value of the car and you won’t own it at the end of the finance deal. Monthly payments tend to be lower for this reason and at the end of the agreement, you will have 3 options. You can either hand the car back to the dealer in good condition, pay the Guaranteed Minimum Future Value and keep the car or use the value of the car to start a new PCP with another car.
Use a car finance broker
Sorting your car finance deal at a dealership can be quick and convenient but so can using an online car finance broker to help sort your finance. Brokers use the finance first approach and match you up with the most suitable lender from a wide lending panel. You sort your finance first and then get the car you want from any reputable dealership across the UK that is verified by the Financial Conduct Authority.
Save up for a finance deposit
Having a bigger deposit to put down for a new or used car can help you get a better deal. There are many no deposit car finance deals if you don’t have the money to hand but even just putting in a small deposit can help. If you do have bad credit, it can help you to get approved for finance too. The more money you put in, the less you have to borrow from a lender which can be more attractive to a potential lender.