- Buying a car without money
- Choose the best option
- Cooling off period – change your mind for free!
- How to get a car for less
- Pros and cons of four different ways to finance your car
Car Finance Personal Loans
Using car finance personal loans to buy a car is probably going to be the cheapest way to get your new vehicle unless you can afford to pay the full price outright. So, let’s look at some important facts about buying a car as well as the benefits and drawbacks of borrowing to make this most important purchase.
The question then arises of whether now is a good time to buy a new car and which is the best way of financing the deal. Of course, if you can pay for a new car outright you will not need to borrow but if you have little or no savings or bad credit, car finance or small high acceptance personal loans might be the way forward.
Cheap Car Finance Helps Sales Soar
In spite of the looming threat of Brexit, the UK car companies are doing well. In January 2017, it was reported that UK car sales during 2016 were at a record high and some of this was due to the very low interest finance car deals that were and which currently are being offered throughout the country. Although predictions for sales in 2017 are lower, sales are still expected to be an an historically high level with many of the expected growth coming from the fleet buyer market.
- 8.2 million used cars change hands in 2016 – a 7.3% uplift on the previous year.
- Q4 demand surpasses 1.8 million – up 5.5% and the biggest final quarter on record.
- Superminis still UK’s most popular body type, but SUVs enjoy biggest growth, with demand rising 16.9%.
- Growth registered across all fuel types, with alternatively fuelled vehicles leading, up 32.5%.
Do you need a personal loan to buy a car?
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Do you need a personal car loan?
If you can’t afford to pay outright for a car, you have two main options: you can borrow the money you need, or you can just not get a car. If you can manage with a bike or a bus pass, you’d do better to go with that until you have saved up enough to buy the car outright. However, if you really need the car, then look into your options carefully. Remember, if you’re buying on credit, try not to go for the fanciest and most expensive model.
Personal Loan for Car
Personal loans can be the cheapest way to finance a car deal. Of course, the deal you get does depend on your credit rating. Personal Loans Now will try to help those with bad credit find car finance personal loans too, but they will tend to be a tad more expensive. In 2016, 2.69 million new cars were sold and many of these were paid for using low interest rate personal loans.
Secured or unsecured?
Choosing between an unsecured and secured personal loan is one of the most vital things to take into consideration. A secured loan is usually cheaper, often by quite a bit. However, you do not want to put your home at risk if, due to an unexpected event, there could be a problem making repayments sometime in the future. An unpaid unsecured loan does not give the lender any rights to your property so there is no risk of losing your home just to buy a car. Whereas, with a secured personal loans UK, there is always a small risk of the bank repossessing your home if you repeatedly fail to pay loan repayments.
Car Finance Deals
Looking For The Best Deal For Car Finance
A personal loan from a bank or building society will probably give you the best interest rate but it is a good idea to shop around and see what car finance deals are on offer from other financial organisations.
So, an important point to think about when borrowing is to shop around for the best deal and more importantly to make sure that it is one you can comfortably afford. Look for the lowest possible interest personal loan interest rates by comparing APRs. The Annual Percentage rates quoted by all car finance lenders will include all the interest payable and any other charges associated with the loan e.g. an arrangement fee or a broker’s fee. Remember, the price you are quoted in a low interest pre-approved personal loan is not necessarily the one you will get after applying.
Compare the interest rate, the monthly repayment figure and the total cost of the loan. At this stage it is also wise to calculate exactly how much you can afford to pay each month and you can do this by adding up all of your monthly income and outgoings and seeing what is left. Take advantage of using a car finance calculator which will be available on money websites and car dealer websites. There are some lenders which specialise in new car finance and others which make selling used cars on finance their own forte.
Cooling Off Period On Car Finance Agreements
Remember that all personal loans are subject to a 14 day cooling off period. This means that if you decide that this is not the way you want to finance your new car, you can change your mind, cancel the agreement and then you will have 30 days in which to repay the principle sum and any interest that is due. All car finance personal loans will incorporate the cooling off period which kicks in either at the date the loan agreement is signed or when a copy of the contract is received by the applicant.
A personal loan will have a fixed rate of interest and as long as you have a good credit score you can get a low interest rate. This type of personal loan offers a flexible term so if you can afford to pay more each month you only need to borrow the money for a shorter period of time thus saving on the amount of interest you will pay.
Example – How Car Finance Interest Works
£7,000 at 4.5% over 2 years would mean monthly repayments of £305.53 and total interest payable of £332.83
£7,000 at 4.5% over 5 years would mean lower monthly repayments of £130.50 but the total interest payable would be £830.07.
Benefits Of Personal Loans For Buying A Car
One of the benefits of buying a car on finance is the simplicity of the application. There is no need to make an appointment at the bank or building society. You can arrange a loan with a car finance company or other kind of lender using the telephone or the Internet. However, if you want to deal face to face with your chosen lender this is possible if they have a local branch.
A personal loan with best personal loan rates can be taken out for part of the cost of the vehicle or you can use a loan to finance the whole amount. So, there is no need to put down a deposit to secure the car you really want.
Using a personal loan to buy a new or used car means that the car is yours from the outset. There is no question of the lender repossessing the car if you get into financial difficulties.
Drawbacks Of Using A Personal Loan To Buy A Car
There are a few drawbacks about using a personal loan to buy a car. Firstly, the money may not come through in time for you to take advantage of a bargain you have spotted.
However, as long as there are no eligibility problems, most funds can be in your account within a day. If there is any hold up, you could consider applying to the car finance company associated with the dealership that is selling the vehicle.
It is possible that using a same day flexible personal loan may cost you more, especially if the car dealer is offering cheap car finance at a lower rate of interest. This marketing ploy is often used when dealers want to move stock quickly. Whilst this may look like a good offer, be sure to confirm that the low rate being offered is the APR and not a flat monthly rate. A flat 2% monthly rate of interest will sound very low as will a flat yearly rate of interest. However, a 6% annual flat rate is equivalent to 12% APR.
It’s also important to ensure that all relevant charges regarding car finance personal loans associated with the contract are included in the rate on offer. The only other drawback about taking out a personal loan is that it could possibly have some detrimental effect if you are planning to get a mortgage in the near future. The amount of debt you have will show up on your credit record. This may affect your credit rating.
|It can be arranged over the phone, internet, or face-to-face||The funds may take time to come through|
|You can choose to cover whole or part of the cost of the car||Future borrowing might be affected|
|Competitive fixed interest rates|
Best Time To Buy Cars On Finance In The UK
Cheap car finance deals are often offered at specific times of the year. Usually, the best months to get a car loan in the UK are towards late February and late August. This is because the new registration numbers come in on 1st March and 1st September. Dealers are always anxious to unload stock which will have lower value number plates and they offer good deals at these times.
March and September are the months that see the best cars sales figures in the UK.
If you are thinking about buying a soft top convertible then winter months are a good time to look when there are cheap cars on finance. Similarly, 4X4s are often most desirable during the winter. So, late spring is a good time to look for one of these vehicles. Additionally, car showrooms are often busy at the weekends but quieter during the working week. Sales staff will be looking to do deals to make up their figures so you can get a better bargaining position by visiting during the week. A better bargain means you will need lower car finance personal loans than if you buy a more expensive car model.
If you are looking for a specific new model it is a good idea to wait for a few months after the launch and you may get a better deal to finance your new car.
Alternative Options for Car Finance
A dealer may well give you the choice of financing the purchase of a new car without using a personal loan. One option that is popular is car leasing. Under this scheme the dealer will offer you a deal that may well appear attractive with lower monthly payments. However, with car leasing you never own the car. The contract runs for a specific period of time, usually between 1 and 3 years. There are restrictions on the amount of mileage that can be used. If you go above these restrictions there are financial penalties to pay.
|Motoring at a fixed monthly cost||Monthly costs are higher because servicing and maintenance are included|
|No worries about the car depreciating in value||Deposit is necessary (usually 3 months rental)|
|Flexible payment terms (from 12 to 36 months)||Possible extra costs if you exceed the mileage limit|
|The car is never yours|
Car Dealer Finance
You might also be offered dealer car finance. This is a form of hire purchase. Failure to make full repayments each month would result in the finance company making an order for repossession.
|Quick and easy to arrange||You don’t own the car until the final payment|
|Low deposit (usually 10%)||Tends to be more expensive for short-term agreements|
|Flexible repayment terms (from 12 to 60 months)|
|Competitive fixed interest rates|
The same rules apply to online personal logbook loans. Logbook loans are a type of secured loan where you give your car as security in case of default. You must lodge the logbook with the lender until the loan is fully paid up. This kind of loan is normally restricted to 50% of the value of the car. So, you must pay the rest of the vehicle cost. There are more details about this kind of loan in the article from the above link.
Personal Contract Purchase
One final option, as an alternative to car finance personal loans, is to use a PCP (Personal Contract Purchase). This applies to new and used vehicles. It is a contract whereby you pay a lower monthly amount for a specified period of time e.g. 3 years. If you choose to pay a deposit the monthly payments will be even lower. At the end of the term you pay the remainder of the cost of the vehicle or just hand it back to the dealer. This kind of contract also has specific mileage limits.
|Lower monthly payments||Mileage and condition of car affects the costs|
|Low deposit (usually 10%)||Total amount paid might be more than with hire purchase|
|Flexible repayment terms (from 12 to 36 months)||Have to pay the outstanding balance to keep the car|
|A choice of what to do at end of repayment term|
As you can see there are many different options when it comes to purchasing a new car. Car finance personal loans is one that should be considered. As long as you are aware of the details of the agreement and are confident you can afford to make all the repayments, taking out car finance personal loans is often the best way forward.
Car Finance Loans
If you want to buy a car but lack the funds, there are many different options. You can take out a secured or unsecured loan to cover all or part of the car. Or, you can just pay a lease on the car, but then it never belongs to you. A PCP is a sort of halfway option, where you pay less and then get to choose whether to keep the car or not.
At Personal Loans Now, we provide access to Monevo’s huge panel of lenders, who can offer car finance personal loans of anywhere between £500 and £25,000*. Whether you want to cover the entire cost of the car or just a part of it, whether you need a bad credit or a self employed personal loan, we’ll do our best to help.