It is only natural to want the best, most cost-effective option for your circumstances when it comes to car finance. However, it can be difficult to know where to start and navigating the various options can be overwhelming. To help you find the best car finance options for your needs, we have put together this guide, highlighting which aspects to look for and things to consider. Hopefully, it will help you to find what you are looking for, whether that is car finance as a first time driver, finance for an upgrade or car finance for bad credit.
Types Of Car Finance
There are several different types of car finance available, including:
- Personal contract purchase (PCP) – this option involves an initial deposit and fixed repayments each month, plus interest. However, at the end of the repayment term, you can either keep the car by making a final lump sum, trade it in for an upgrade, or return it to the dealer.
- Hire purchase (HP) – this option is the most common and also involves an upfront deposit, then paying fixed monthly instalments of the car finance, plus interest. After the final payment is made, you will have paid the full value of the car and will own the vehicle.
- Personal leasing – this is also known as contract hire and is similar to PCP. The main difference with this type of car finance is that you will not own the car yourself, but instead, you will be renting the car for a set period with an agreed annual mileage.
Things To Consider When Searching For Car Finance
It is crucial to shop around when searching for the best car finance rates to meet your needs and budget. Take your time to do some comparison work, use online calculators, and read reviews to see which options could work best. During your research, there are a few key points that you need to keep in mind:
- Eligibility – check whether you meet the eligibility criteria of your chosen provider before you apply to avoid potential disappointment.
- Term – consider how long you need to borrow the money for and the kind of term options that are offered by the lenders you are looking at.
- Interest – these rates are typically offered based on your credit rating and how long you want to borrow for. You may find different rates across a variety of lenders, so it is a good idea to compare various lenders.
- Fees – when you think that you have found the best rates, you will need to check for any extra fees. Some finance companies can charge exit or late repayment fees.
How To Find The Best Car Finance Rates
If you have determined that car finance is the most suitable route for your needs, you will need to find the best rates and cost-effective options. Here are a few tips to help you:
- Check your credit score and try to improve it – the higher your credit score is, the better chance you have of securing cheaper rates on finance. You can check it for free through Experian, Equifax or TransUnion, and receive suggestions on how to improve it.
- Do not apply with multiple providers at once – each time you go through a full application, a check could be carried out on your credit rating, which leaves a mark. One rejected application should not cause too much damage, but lots of applications in a short space of time could be detrimental.
- Look at the APR, the repayment period, the fixed or variable rate, and the application time.
- Do not be afraid to ask questions – lenders that have your best interests at heart should be willing to answer any questions that you might have.
If you need any further help with finding the best car finance options or more information about car finance, please seek support from the Money Advice Service.