In the UK, the motor trade makes a FORTUNE out of car financing. And with finance schemes being the main source of profit for many dealerships and car brokerages, they’re keen to sign up as many customers as possible. That includes people with bad credit, and sometimes potential customers who are unemployed, bankrupt, in part-time work, or have a County Court Judgement against them.
Life without a car or other type of vehicle can be awkward, to say the least. It can pose limitations on so many different areas of life, can’t it, particularly in the realm of seeking work. It’s little wonder, then, that demand for car finance is always high across the country. When attempts to raise the necessary capital through credit cards, independent borrowing or personal loans have failed, the usual option for those seeking to get a new set of wheels for the first time (or to upgrade from their current vehicle), is to turn to a car finance company.
Fitting your car finance to your budget
Everyone’s financial situation is different, of course. And people from all walks of life seek out car leasing help whether their credit rating is good or bad. But what sort of car finance should you go looking for? What are the choices? Hmm…
Let’s answer that question right now, as we launch into our handy 5 Tips on Getting the Car Finance You Need list!
Tip 1: Know your options
When it comes to car finance, the choices are not exactly plentiful, but you should still be able to decide between going for 1) personal leasing – monthly payments to make, but with no option to actually purchase the car at any stage, 2) driving the car away on Hire Purchase – you only own the car once your final payment is made, or 3) signing up for a personal contract plan (PCP) – you can buy the car at the end of the contract, with a final lump sum payment (aka a ‘balloon payment’).
Tip 2: Avoid keeping monthly payments low
Sounds mad that, doesn’t it?! However, as tempting as it is to force the monthly repayments on a car loan down as far as possible, that can be counter-productive to your finances overall. Long-term interest payments can prove crippling for so many borrowers, as well as meaning that the car they eventually can call their own has cost them way and above what they initially expected. Before signing a loan contract, reach for a calculator and take some time to work out exactly what the loan will cost you from start to finish. Usually, it’s kinder on borrowers’ pockets to sign up for a three-year deal.
Tip 3: Don’t accept the first marriage proposal!
By that, we mean don’t sign up with the first car finance brokerage or dealership you talk to. Best to look at different options, compare deals, be vigilant for discounts, read reviews… Like most things, the more options you have available to you, the better. Also, some brokers submit applications to a panel of lenders (rather than a single financer), which could greatly improve your chances of having your loan application approved.
Tip 4: Don’t plead at the feast
Without borrowers, car finance companies would be out of business, right? Right. Also, for many dealers, car leasing deals makes them more money than actual car sales! With all this, it’s obvious that financers and borrowers need each other equally. So, even if you’ve got poor credit and feel like you’re coming at securing a car loan from a weak position, don’t let it shape your behaviour or thinking too much. Gratefully grabbing the first deal put in front of you is likely to end in tears. Best to shop around, find out the typical tricks brokers and dealers pull (so you know what to avoid). Get the right deal for you, even if you’re being told the offer they’ve just put in front of you “is the only one you’ll get, mate, given your low credit rating”.
Tip 5: Be clear on ALL fees you’ll be expected to pay
Coming across a hidden fee can be maddening, can’t it? Infuriating, actually. Just when you thought you’d carefully done your sums (fifteen times!), got your projected repayments all arranged, and are moments away from driving a lovely car away from a dealership or car brokerage company’s forecourt, you notice something in the small print, or the broker throws something in to the conversation about “Compound Interest“, or “an up-front deposit, as you’re credit rating is a bit of a worry for us here, to be honest.”
As one final point (probably the most important tip of all), whichever deal you eventually decide to go for, make sure you get it in writing.