A car can be one of the largest investments you make in your lifetime alongside your house, so finding the funds to pay for a car upfront can be difficult and unrealistic for many people. However, there are options out there if the thought of having to pay the full price for a car upfront fills you with dread. One of the more popular options you can consider is car finance.
What Is Car Finance?
Car finance differs depending on the type you go for, but generally, you will pay a deposit upfront and then you will pay a monthly amount for a set period of time to use the car. What happens at the end of the contract is where it gets a little more complicated and will depend on the car finance option you opt into.
What Are The Different Types Of Car Finance?
At Best Online Car Finance, we offer two different types of car finance and can help you decide which one is right for you.
With hire purchase, you sometimes pay a deposit upfront, then pay an agreed amount of money over a period of 24 to 60 months, plus interest. Once the contract has come to an end, you have the option to own the car outright, if you want to, you will then pay a usually small fee in order to cover the change of ownership.
Personal Contract Purchase (PCP)
PCP generally takes the same form as hire purchase car finance. Whereby you typically pay a 10% deposit and then monthly repayments, plus interest for a certain amount of time. The difference with PCP is that you pay the amount the car will depreciate by rather than the car’s value. You also have a few options to consider at the end of your contract. You can either: return the car, pay a balloon payment (which is usually the car’s resale value) to have complete ownership over it or use the resale value to put towards another PCP car finance deal.
How Much Does Car Finance Cost?
When it comes to used car finance, there is not one cost that fits all, it largely depends on the type of car finance you go for and more personal circumstances such as your credit score and affordability, which will always be assessed by a lender upon signing up to a car finance deal. Our car finance calculator gives you an idea of the monthly payments depending on how much you’d like to borrow.
Can I Get Car Finance?
We like to help as many people as we can get car finance, so there are only a few things we need to know about you:
- That you have a stable employment history (typically 3 years)
- Your are a UK mainland resident (including Northern Ireland)
- You are over 22 (unless you are already a homeowner, have a well-paid Hire Purchase record or we will consider a parental guarantor)
Whilst we do perform a credit check, we can consider your application even if you:
- Have payday loans
- Have historic defaults or missed payments
- Are discharged from bankruptcy or IVA
- Have no deposit
Other Factors To Consider
When taking out car finance, there are a few things to consider before doing so:
Affording The Monthly Repayments
Whilst we’ll make an assessment on your affordability, you need to factor in the monthly repayments to your own monthly income and outgoings. If you fail to make your monthly repayments in full and on time, you could risk losing the car and causing damage to your credit score, which could affect your chances of getting any other form of finance in the future.
Early Repayment Charges
If you enter a car finance deal and then decide you want to cancel it or change it, you could risk early repayment charges. This is where the lender charges you an amount for exiting the deal earlier than you agreed. You can also incur charges for excess mileage, damage and wear and tear on your vehicle.