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How to Compare Car Finance Loans
In today's world a car can be a necessity, but buying one, whether new or used, can be tricky considering the costs!
A car finance loan is specifically designed to help people from all circumstances afford the cost of a car. These loans are unsecured (i.e. you don't need to own your home to be approved) and will consider people from a large range of financial situations.
Car finance loans are good for:
- New or used cars
Most car finance loan lenders will stipulate a particular dealership or franchise that you have to buy the car from, although the actual make, model, colour etc will be left down to you.
Tip: If you have your sights set on a particular car, check your chosen lender's terms. They may specify that you choose a car from a dealership that doesn't sell the particular model you are after.
- Various financial situations
These loans have the advantage of being 'unsecured', so you don't have to use your property as collateral. However, they are still available if your financial history is less than perfect, as the vehicle you choose will not be entirely yours until all the loan repayments are met.
Car finance loans are unsuitable for:
- Impeccable credit history
If you have a gleaming financial history it may be better to take out a standard unsecured loan rather than a car finance loan. You won't be restricted with your choice of vehicles, you will be able to buy total ownership of the vehicle outright and you will get preferential rates of interest.
- Impulse buyers
Before buying, consider carefully the amount you can afford to spend (i.e. how much you can afford to repay per month), the practicalities you require from a vehicle (don't get a 2 seater sports car if you have a family of 4) and don't be swayed from your decisions.
It's easy to be influenced by salespeople, so make sure you know your limitations and go into the dealership wised up to the qualities you require from a vehicle, ideally with a shortlist of possible vehicles in mind.
Look for:
- What's on offer?
Before you sign yourself into a contract, make sure you know what you are getting yourself into and whether or not it's right for you. There are various names for the car loans on offer, although they all broadly fall under two categories.
1. Hire Purchase
- The most straightforward type. You pay a designated amount of money each month for an agreed length of time. Only when the entire loan amount is settled will you officially own the car.
2. Personal Contract Purchase (PCP)
- You can make lower monthly repayments by deferring a lump sum amount to the end of the loan term. At the end of the loan term you then have the choice to either pay off the remaining loan amount (referred to as the balloon payment), or trade the car in for a newer model.
Watch out for:
- Car purchase restrictions
The lender you borrow from if likely to have allegiances with certain car dealers, franchises, superstores etc. Check that the places you can choose your car from offer what you want, or - if you are undecided - provide a comprehensive portfolio of vehicles to choose from.
In addition to this, check for any additional restrictions, such as, car mileage, service history or age, which must be satisfied.
Don't forget!
- It's not yours yet!
Although the car is yours to drive, wash, dent and repair, you won't technically own it until you have paid off the full loan amount. So remember, if you sell the car privately you will still be have to repay the remaining loan amount.
Compare car finance loans
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