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Getting A New Car? – Top 5 Things You Should Understand About Car Financing
Cruising along British roads, it’s easy to notice fancy cars moving around with registration plates from five years ago attached to them. Ever wondered why there’s a lot of them?
Three words: car financing deals
You’ll see it all over the place – staring right back at you while you’re watching TV or moving around the town. Obtaining a great finance deal is not as difficult as it seems especially for a new car you dream.
There’s no need to feel overwhelmed: Here are the important things that you should know about car financing deals.
Car Financing Types
Walking around into a dealership is thrilling and mind-boggling at the same time. Understanding what your options are ahead of time not only helps you keep a clear head and save you more energy, but it will help you find and guide you in getting the best new car deal for your circumstances.
There are three main types of car financing:
Personal Contract Purchase (PCP)
PCP is the most sought-after type of car financing. PCP allows customers to get a car by paying fixed monthly installments after giving a lump deposit. If you’re planning to make an outright purchase, return the vehicle, or privately sell, all you need to do is settle the balance with a lump sum payment.
This is a typical option for people who regularly upgrade their cars who want very little hassle.
Keep in mind that obtaining a new car or vehicle via PCP is similar to vehicle hire. It’s crucial to obey the terms and conditions while keeping the car in tiptop condition. The car will finally be yours when you settle the balance or final lump sum.
Hire Purchase (HP)
Acquiring a new car that you want should not be difficult, and this is what HP financing is all about. You’ll be securing your loan against the vehicle itself which you will own as you finish paying for it. However, you won’t be able to sell the car without any permission from the lender but it’s possible to return the car to the dealership.
Similar to other car financing deals, you have to give a guaranteed deposit after the terms of the loan of your new car are set. You have to make repayments including the interest. Upon finishing the payments, you have complete ownership of the vehicle.
The great thing about an HP loan is that service, as well as other features, are also included.
Great for someone who doesn’t want to own a car, renting a car as a contract lease is a great way to get started. Your repayments will be based on the model and make of the car, the negotiated mileage caps, and the contract length of these lease deals.
Contract hires have their risks and disadvantages. Usually, you’ll be required to pay for at least three months of rental in advance, which may negatively affect your budget and finances. The good news is that you can save money over the long term because servicing is usually included in the contract.
New car finance deals
When reviewing any new car financing deal, consider reviewing the applicable APR, and also compare the additional administration fees and payments. Terms and conditions do need to be read – so before you agree on offers and deals of new car finance, take note of the finer points of the contract to make sure it is secured.
Check out the auto loan deals for new car available from our reputable range of lenders and compare.
Will my car finance restrict me to a dealership?
Marketing strategies and salespeople can easily confuse the customer. Having a loan package with special rates that is delivered by a dealership can be straightforward and appealing, but you may end up paying more.
As a client, you’re free to shop as you please. It’s often worth looking at what quotes you can get and compare before you set foot at any car dealership.
Will my credit score be affected if Iooked around?
It is advised to take precautions when shopping online. Filing needless car loan applications or any loans from multiple lenders is usually a red flag to lenders.
Utilizing reliable firms that perform “soft credit searches” will not leave any mark on your credit history. They’re just comparing your personal information with the available records to verify your identity.
When you agree to a quote, and you are completely satisfied with the terms, you’ll need to fill out a form. This is going to incur a hard check on your credit record.
Prompt repayments credit score benefits
Doing some sort of financing will earn you a bad credit rating is a usual misconception – there’s simply no truth to it. Making prompt repayments really works for it tells other lenders that you’re low-risk as opposed to those with zero credit history.
Late repayments may be harmful to your credit and surely does affects on your credit score, as it makes you appear a risky borrower for most lenders. Selecting a reasonable deal that you can easily repay is the right option.
No lender should deny you if you want to pay the remaining amount in full at any time throughout the arrangement. If you feel like settling your outstanding balance and know your rights and benefits, you need to reach out to your lender.
Review the financing’s terms and conditions for charges or fees associated with early repayments and other consumer rights.