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Few people could buy a car outright without sourcing some sort of car finance deal to make it happen. A used car is typically far cheaper than a new car, but even then, vehicle finance could be necessary to be able to afford the vehicle. And it could also depend on the make and model of car, of course.
Regardless of whether you've just got your driving licence or you've been driving for years, there's a lot to think about when looking for a used car or a new one.
If you're wondering about car finance options for your next car, we may be able to help. Let's go through some of the details you should know about if you decide to buy a used car in the future.
There are plenty of finance providers out there offering finance deals, so it makes sense to know as much as you can about finding a finance option for your perfect car.
Plenty of approved sources may offer the chance for you to obtain car finance. While you could get car finance from a car dealership, you'd be limited on the finance plan and available finance providers.
The dealer acts as an appointed representative for the finance company involved. It could work far better to find a finance company online instead.
This is because you could compare the cost of a car upfront, looking at representative APR rates, the annual interest rate, and other elements too.
You could see whether it might fit into your available monthly budget, searching for car finance that could work better for you.
It could be, but again, you need to check all the facts if you're searching for car finance. That's where Loanza could help.
With your employment, income, and address history, you've got the information required to help gauge whether a lender could loan you the money you need for your new car.
Loanza is a credit broker, not a lender, so you could use our free service to compare the cost of a car loan from one lender to another.
Simply enter your personal details, address history, and other info, and wait for our system to check over 50 lenders.
We could then present you with a competitive car loan, including details, so you can see if it could be a sensible way to get your next car. It could end up being far quicker than checking various finance offers online on your own too.
No doubt you've got a few queries before you think about applying for car finance. We've answered some of the most common ones for you below.
There are plenty of consumer credit services you could use to help you fund a car purchase, in common with other UK residents. We'll learn more here.
HP hire purchase is a common method people use to buy a car. It's not the same as personal contract hire, as this refers to hiring a car for monthly payments rather than buying it.
With hire purchase HP, you make monthly payments on a car finance offer.
These payments reduce the amount owed, and at the end of the agreement, you make a final payment to clear the debt. You're then the owner of the car you bought via the arrangement.
In this case, the car finance is secured against the vehicle. So, if you failed to maintain the monthly payments, the lender could seize the car, whether it is a used or new car, to get their money back. Finding and buying a car you can afford is always of paramount importance.
This is different to hire purchase, so if you're considering different car finance options, you must be certain you understand the differences between them.
While the hire purchase method results in you owning the car at the end of the term, this doesn't necessarily apply with personal contract purchase PCP. You might also see this termed as a PCP personal contract.
In this case, you pay an initial deposit on a new car and then make monthly payments on a portion of it. The projected value of the car at the end of the payment period (usually a few years) is the amount you'll pay at the end of the term if you decide you'd like to keep the car. This is known as a balloon payment and is typically for several thousand pounds.
This is an optional final payment to keep the car at the end of the agreement. If you don't make that payment, the car is returned to the seller. That's the difference with a PCP personal contract, and only you will know which method of getting a car is best for you.
Is this right for you?
So, you need to decide whether you could afford this if you want to go for a personal contract purchase PCP arrangement. If you won't have the funds to pay the lump sum when the term ends, you could be more suited to the hire purchase model.
Either that, or you'd need to return to square one and think about a loan for another car. You can see there are many variations here, so it's always sensible to explore them all before looking for a suitable offer.
Your credit score does have a bearing on whether you could obtain car finance. Moreover, your credit history could influence how much you pay for your car finance rates.
Those with bad credit could experience higher monthly payments. Those with excellent credit could well receive lower monthly payments as they could pose a far lower risk to the lender. You can see how this could affect your monthly repayments.
If your score is lower than you'd like, think about whether you could make improvements to it before you search for a car loan. This could result in getting more preferable rates, although it depends how quickly you could do with another car.
Any lender should check your credit rating when considering you for a loan. Some may only approve those with a credit score falling into a certain bracket. For example, some might cater to those with a good or excellent credit score, while others might target those with a fair credit score.
Put simply though, the better the information is in your credit report, the more likely it is you could get an affordable car finance offer.
A soft search is a preliminary check on your credit rating and history that doesn't affect either one. This means you won't get points taken off your score.
It doesn't guarantee that you'll be accepted for car finance, but it does give you a reasonable idea of whether a lender might accept you.
If you use our free and convenient form to see whether you could get car finance via one of our network of 50+ lenders, you'll only be subject to a formal 'hard search' if you decide to go ahead and apply for the recommended offer.
And of course, every lender we work with is listed with the Financial Conduct Authority, so you'll always have total peace of mind.
It's possible to part exchange your existing car and buy another one on car finance. You could also potentially come to an arrangement with a dealer to part exchange your vehicle even if your current one still has any remaining finance to run on it.
It's a little more complicated to arrange, and you should look at the figures first too. A finance calculator always comes in useful here. However, it could be more cost-effective to sell your car, clear your existing car finance, and then take out a new personal loan for your next car.
As with every other finance agreement, check the details of your existing deal, the terms, and see which option could be cheaper for you.
As we have seen, there are several possible loan types you could get if you want to buy used cars or even a new one. No doubt you want the best deal - and the best car - you can get.
Finance, affect notwithstanding, is vital to understand, and you'll get the most accurate information when you read everything thoroughly.
This applies to HP hire purchase and regular loans, so make sure you also know which one you're looking for.
Some car deals have fixed percentage rates, giving you the same clear amount to pay back each month. Others work on variable rates. These are usually lower than fixed rates, but as you'd guess, they can vary if circumstances dictate.
Some prefer lower payments. Fixed deals could therefore be better when interest rates are low. However, you're not protected against any rises.
If you want the knowledge of having the same amount to pay each month, a fixed rate is better. It protects you against those unpredictable rises that could potentially occur.
As we said earlier, we're not a lender - we're a credit broker. You could apply for a personal loan from one of the lenders in our network.
If you're accepted, you could take the money to a reputable UK dealership to find your next car.
We're regulated by the Financial Conduct Authority and you can check our firm reference number and our registered office address.
We've designed our form to be as easy to complete as possible. If you're looking for car finance possibilities, use our free service today. We don't charge fees and we give you all the clear details you need to help you decide.
If you find and apply for a car finance offer, you could make regular payments from your bank account. Details are clearly given with each car finance possibility.
The annual percentage rate, representative APR, and any fixed fee information... it's all there. We aim to do the hard work on the comparisons for you, so you can decide whether we've found you a competitive offer.
Try us today and you could find car finance with competitive monthly repayments via our convenient and easy-to-use website. You've got your driving licence. Now your new perfect car could be closer than you think.