Thursday 1st of June 2017
Want to buy a car without paying the huge price tag all at once? Luckily, there's a very easy way to do this, and it really doesn't cost you the earth. Payments are made to be more manageable so you can afford a brand new car. Car loans and finance give anyone the opportunity to own a new car and save you from losing out on high depreciation rates. When buying a car, you will probably be offered multiple options to help pay for the vehicle. Here’s an in-depth guide detailing everything you need to know about car loans and what they mean for you. This will help you make a well-informed decision.
Perhaps the most important question of them all: what exactly is car finance? Car finance is a tailored loan which enables you to purchase your own car without paying the whole lump sum all at once. Usually, car dealerships and garages will offer car loans to customers which you pay back in installments, usually pre-agreed monthly payments. They can also be granted from banks or building societies, as personal loans and much more. Though it may seem complicated, the process is usually very straightforward and can be characterised as a two stage process. Firstly, you need to decide upon the make and model of the car you want. Then you just need to decide which provider you'd like to borrow from.
Anyone can apply; acceptance depends on a number of factors including your credit rating and income. Those that have a bad or lower credit rating could find it more difficult to get car finance or a loan. Even those that get declined by one company can apply for car finance from another company and may be allowed to get the loan. So remember if you have been rejected for any reason, don’t give up hope as there may still be a great deal available with another provider. Oink Money compares the market's best car finance deals from a number of providers, helping you to get the best possible deal to suit your personal circumstances.
Car finance may seem like a tricky topic to some, but once you understand how it works, these loans are actually really simple. Once you have decided on the make and model of the car you want, you must decide who you want to take the finance agreement out with. This depends on the amount of money you pay for your car, how often you pay and the duration of your contract. Below is a list of possible options and what they mean for you as a customer:
Hire purchase is secured against the car, meaning that you do not own the car outright until you have made the final payment. You are able to return the car at any point but you cannot sell the car without permission of the owner. Usually, you pay in installments along with interest over the repayment period. Once the payments are complete, you will be the legal owner of the car.
PCP deals suit those who want to change their car at the end of their term. It involves the driver paying a deposit and then small monthly installments over a fixed period of time. At the end of the fixed period, you can either pay a lump sum to buy the car outright or return the vehicle back to the dealer. You can also sell the car on to someone else to pay the money back to the dealer. Bear in mind that you must keep the car in good condition to avoid penalties if you return the car to the dealer.
In essence, this is the same as PCP but there is no option at the end of a fixed term to buy the car. This is convenient for those looking to change their car often without the option to buy the car outright.
If you want to buy the car but do not have all of the money available in a lump sum, then it is a good option to apply for a personal loan for the one-off payment, then keep up with the repayments to the bank or lender. You will be able to spread the costs out for as long as you like and you will own the car outright from the start. This method of payment is easier for those that have a clean credit rating.
It is possible to buy your car using a Credit Card, as long as your limit is sufficient enough for this purchase. If you decide to pay by Credit Card then interest and APR could be high and not all dealers accept Credit Card payments for vehicles.
When it comes to car finance and loans it’s important to understand how it works and what option will be the right one for you. Take the time to shop around to get the best possible deal. Oink Money is a Responsible Broker - Please ensure you can afford repayments before applying.