Should you join the 82% of UK drivers who got their car on finance in 2018? If you find yourself asking this question and are unsure of the correct answer, then you’re in luck! UK Car Finance, a car finance provider based in the North East of England, are here to help you! You may be unsure of how car finance works, you may not understand car finance jargon or you may be worried about affordability – but that’s ok! In this post, we discuss the benefits of car finance and why it might be the right choice for you.
What do I need to know?
Car finance was introduced into the finance industry with the intention of being an affordable way for drivers to fund their next car, and that’s exactly what it is!It’sworth mentioning that within car finance there are 3 main types of car finance agreements but there are others! A personal loan gives you the most flexibility. It is a form of car finance but is ultimately a loan to buy anything you want. Many car finance companies use personal loans as it gives you the flexibility to buy the car you want within your budget. It also means that you will own the car outright as you have used the loan to pay for it. You will receive your agreed sum and then use it to shop for the car you want. You then pay back your agreed loan over a fixed period. HirePurchase (HP)is another type of car finance agreement. When Hire Purchase (HP) was introduced, you usually had to put a deposit down but now there are many no deposit car financeoptions available. You take out a loan for the required amount on your car and then pay back the amount in monthly instalments. Once all your payments have been made at the end of the term, you then own the car. Personal Contract Purchase (PCP) is similar to hire purchase, where you can use your car until you make all your payments. However, at the end of a PCP agreement, you have three options. You can either, hand the car back, use the resale value to buy a different car or pay the resale value and own the car.
What are the benefits?
It can be very hard to save up enough money to buy a car outright, especially when you are a newly qualified driver. Car finance is a great way to spread the cost of your next car. Depending on which car finance deal you get, it can also be really flexible. As mentioned, you can use the resale value of your current car on your next car in a PCP deal, which is great for people who get bored quickly. Car finance applications are also an easy process! You don’t even need to visit a dealership; online car finance providers allow you to apply for car finance from the comfort of your own home! You can also save money on repair and maintenance costs as finance allows you to afford a newer car which usually has lower running and repair costs.
Are there any drawbacks?
Car finance isn’t for everyone, we know this. But it is becoming more affordable and accessible for people with different circumstances, including those with bad credit. Because you don’t own the car until the end of the agreement, you must keep the car in good condition, as chances are you will give the car back at the end of the term. There is also sometimes an annual mileage restriction on some deals so make sure you discuss this with your finance provider. Car finance is a legal agreement which means when you sign it, you are signing a legal document. Within your agreement you are committing to making the fixed payment for the fixed amount of time. Any missed payments or late payments can result in additional late payment charges and can affect your credit score. If you’re worried about a bad credit score,acar finance checkeris a great way to check your credit score for free and see where you fall on the credit scale. A soft search check on your credit file doesn’t harm your credit score and you can even check your credit before you apply for car finance.
Can I afford car finance?
Your agreement is all about affordability. Because you are tied into a contract, it’s crucial that you can afford your payments every month. If you’re looking for car finance and not sure how much you can spend, why not use an online car finance calculator for free? This way you can set your monthly budget and term length and then have a look for car within your budget even before you apply. You also need to factor in the cost of running a car when setting your budget. You will need to make sure you can comfortably afford your car finance, car insurance, road tax, breakdown cover, fuel costs, maintenance costs such as MOTs and services and any unexpected repair costs. It more sound like a lot but the cost of running a car has never been more affordable!
What documents do I need?
Car finance companies will usually ask you for a few documents to verify that you are who you say you are and also prevents any fraudulent claims against yourself or the finance provider. Depending on which lender you are approved with, you may be asked to provide different documents. In general, though, you may be asked to provide personal details such as name date of birth and marital status, proof of income, address history, driving licence type and bank details. Its best to get your documents in order before you apply for car finance to speed up the application process!