It is not always possible to buy a new vehicle simply because it is just too expensive for most people to afford. However, car financing makes buying a new car much easier. Here are a few questions about car finance to ask yourself before signing off on a deal.
What Exactly is Car Finance?
This is a credit agreement made between a buyer and a lender (financial institution) which allows a person to buy a car.
Can I Get Car Finance with a Bad Credit Score?
Even If a buyer has a poor credit history, they can still apply for car finance. The car dealership or financial institution will look at the buyer’s personal circumstances, such as their income, loan size, and employment status, alongside the credit history. Buyers will then be given recalculated interest rates.
What Types of Car Finance are Available?
There are 2 common types of car finance available, namely a personal loan and a personal contract purchase (PCP).
The personal loan lets a buyer borrow money from their bank or financial institution, and buyers get instant ownership of the vehicle after purchasing it.
The PCP method involves paying a deposit of about 10% on the vehicle, with fixed monthly payments. The car will be owned by the financial institution until all the instalments on the car have been paid off. When buyers put down a larger deposit amount on a car, they will likely pay less interest and, consequently, pay less for the car than using a smaller deposit.
Is it More Cost-Effective to Buy a Car in Cash?
It will be cheaper to buy a car with cash in most cases. When a financial institution finances your vehicle, it is essential to compare the interest you will pay on the car financing option with the car’s actual value. Ensure that the financial institution does not charge you with an excessive amount of interest.
Is it Possible to Buy a Used Car on Finance?
Yes, banks and other financial institutions allow consumers to apply for finance to purchase a used vehicle. When buyers search for car finance options, they need to provide the registration number of the used car to the financial institution.
It is always best to speak to more than one financial institution about your car finance options to get all the answers to your questions.