Nine Car Finance Myths
In this article we look at nine common misconceptions surrounding car finance.
If you have a poor credit rating you will incur a huge interest rate on your finance deal.
This is totally untrue. If you have been refused credit in the past or find yourselves with a poor credit rating there are still plenty of car finance providers willing to lend to you.
Interest rates are not calculated solely according to the credit rating of the applicant, the interest payable depends on a number of factors including the term and value of the agreement, electoral role registration, earnings and employment status.
You need to find the car you want to buy before you can get some finance.
This is a common misconception and is again, totally untrue. It would be difficult to find the right car for you if you don’t yet know how much finance is available to you. So most lenders will be able to give you a good idea of the amount of finance they will provide you with.
An agreement such as this is known as an ‘Approval in Principle’.
You must use the finance option offered by the dealership from which you want to buy your new car.
A dealership will encourage you to use their own finance packages but they are often not competitive in terms of rates. You can secure finance from any provider and use it to buy a car from any dealer. There are now more providers of car finance in the UK than ever and it makes sense to shop around.
It is more complicated to get car finance than a bank loan.
It couldn’t be simpler to apply for car finance and it can be done online or over the phone in a matter of minutes. Many bank loans are much more involved.
There are lots of hidden charges and fees associated with car finance.
Some lenders do charge an arrangement fee but many providers don’t. It is worth checking this early on in the application process. Apart from that, there should be no additional fees. The car finance industry is bigger than ever and is highly regulated.
Self-employed people can’t get good finance deals.
If you are self-employed you can still secure finance at a competitive rate, you just need evidence of your income and your business details.
If you have been declared bankrupt you can’t ever get car finance.
If your financial situation has improved then many lenders will be prepare to provide you with finance. If you are currently bankrupt then you won’t be able to secure finance.
You need to have a car to part-exchange or a deposit in order to secure car finance?
This used to be the case with many lenders but these days they are much more flexible on this. Some lenders do not require any deposit.
If you’ve been refused finance in the past you will be rejected should you try again.
Different providers have different criteria and if you do get turned down it is well worth trying other lenders until you find one willing to lend to you.