How to Become Successful in Obtaining Car Finance?

An automobile is not just a means of communication. People are passionate about it and their love for the four-wheeled beauty is eternal. If you want to buy a car of your own, here’s some help. The car financing guide will provide you with information about the entire process. It will aid you in obtaining a successful finance deal. It includes a list of factors that you should consider before making a decision. So, let’s start.

Be Ready

Financing a car is not like buying a new pair of shoes or a shirt. You will have to be ready with a few things.

Borrowing Capacity

Good things come to those who wait and prepare. So, don’t think you can find your favourite car and the perfect loan program in a day. Before you start looking for your new or used car, you must sit and calculate your budget. Know how much you will be able to borrow. Also, ascertain your monthly payments. You can use online calculators for this purpose.

Documents

A. For PAYG Employed Applicants – Copies of recent 2 pay slips and the Group Certificate for last financial year are required

B. For Self-Employed Applicants – Copies of the last 2 years Tax Returns including full financials

Deposit

The car dealer may ask you to pay a deposit so that he can reserve the car for you. Deposit is ten to twenty per cent of the car loan amount. It is not a small amount. So, you should spend some time in getting together the money for it.

What’s available?

Before you start searching for the perfect car loan package, you must have some basic knowledge of the car financing options that are available in the market. There are two main sources of car financing.

1. Car Dealer Finance (i.e. provided by the car dealer)

2. Alternative Car Finance (i.e. provided by banks, credit unions, finance companies, etc.)

After you decide on the source of financing, you will have to choose the car financing product. There are a number of car financing options to consider. To make your decision process easier, here is a list:

Personal Lease

It is an ideal option if you are using the car for personal purposes. The lease term can vary from one to five years. It is available with both fixed and variable interest rate. Its rates are lower than other car finance products. It is possible for you to select the residual value and opt for lower monthly repayment.

Car Loan

A car loan enables the lender/credit provider to take security over the car that you are buying. It helps them in protecting their investment. To get approved for a car loan, you must purchase your vehicle from a licensed car dealer. You have the benefit of choosing a long-term loan (up to seven years) as well as the residual value.

Personal Loan

These loan packages can be secured or unsecured. If you opt for a secured one, it won’t be secured against the car that you are buying. The interest rates are slightly higher but, you get benefits of flexible loan terms and simpler approval requirements.

Chattel Mortgage

It is an ideal option if you are using the car for business purposes. The lender will use your car as a security. Sole traders, partnerships, companies, trusts, and ABN holders use this option.

The loan term ranges from one to five years. It has low-interest rates. The monthly payments on the chattel mortgage option are eligible for tax deduction.

So, these are the available options. Once you choose the car financing option, you can apply with a lender or dealer. But, don’t be in a hurry. Take ample time in deciding on the things mentioned in the car finance guide. It will help you in choosing a profitable and beneficial financing package.

Car Finance Places You On The Top Gear While Buying A Car

Fast car on open roads. It is a perfect picture for any car enthusiast. But you have to go to your work and also drop your kids to school. This is the real picture for most of us. We need to save time when we don’t have any. A typical individual has so many odd jobs to complete that a car can, without doubt, facilitate their accomplishment. Financing your car doesn’t fit your idea of the way of buying your car; then probably you are still stuck with traditional car buying methods. Shed your inhibitions with regard for car financing because it undoubtedly keeps in mind your financial caliber before furnishing you with a car finance loan.

Car financing has taken a new spin with regard to providing investment for buying a car. So, how do you finance a car? If this question leaves you baffled, then you have to go a long way in the process of buying a car. The term ‘financing’ in relation to buying a car connotes either rendering loan to buy the car or lease the car to you. You are probably concentrating on the former meaning. Many people are in favour of talking car finance from dealership for it seems like a convenient option. It seems easy; you select a car, fill out a credit application, and drive away with your car – all in a day’s work. Car finance through dealership will give you car finance on weekends and even at nights when other banks and credit unions are closed.

Seems convenient, isn’t it? But there is a catch. The dealer will be certainly charging you more for your car finance. Usually car buyers are overcharged by 3% on their car finance. A great number of complaints about car financing are related to dealers. 0% APR is not only attractive but lures the buyers to acquire up car finance not meditating if it is feasible for them. There are very few people who can actually get a 0% APR. Thus car finance deals usually fall midway thereby making car finance experience an extremely distressing one. You are buying a new car and probably for the first time, you certainly want it to compliment your enthusiasm. There are few elementary things that need to be kept in mind before taking that crucial primeval step in car buying.

First and foremost in car buying and financing is checking your credit score before you apply for a car loan. Many people are unaware of the fact that they even have a credit score. You can expediently check your credit score online. So, if you have bad credit history then probably you will be paying more interest rate for your car finance. If your credit score drops below 550, then probably apply for new car finance is not such a good idea. First repair you credit score. Repairing credit score requires little effort, helps you repay your debt and retain your credit report. Online car finance companies can get you car finance loan even if your credit score is lower than required. Your car finance loan can get approved in minutes. Online car finance companies have revolutionized car finance procedure. With lowest online car finance rates, no application fees, or down payments car finance companies provide a formidable competition to car dealers. Car finance companies have set a standard for providing car finance that is worth opting for.

70% of cars are obtained by some kind of financing. You can even finance a used car. The process is as effortless and undemanding as financing a new car. The essence to finding the right car finance is doing to research about your kind of car. Knowledge is power; you must be awake to this age old logic. When so much information frequently exists, then why not make use of it. Find out how much your car costs by comparing rates with local dealers. Very decisive, is cognizing how much, you can afford. Calculate, you monthly income and deduct your usual monthly expenditure to find out how much you can afford on a monthly basis. Compute carefully, otherwise you will find difficulty in repaying your car finance loan. And you definitely don’t want to fool around with your repayment plan because a lot is at stake. You can seek free advice for your own car finance online through credit unions and loan institutions.

You are a car enthusiast, a car consumer, a just a person who needs a car you ought to drive the best car. And why not drive the best car, when you have access to the best car finance plans. Car financing is a transparent route that leads you to become a car owner. Car finance loans are usually short term loans ranging from 36 to 72 months. Shorter loan term imply, lower interest rates and will prove to be cheaper. You have been working hard to select the car you want; there is a fairly good chance that you would not have to work so hard for car finance. So, sit back relax and enjoy the ride.

Car Finance – What You Should Know About Dealer Finance

Car finance has become big business. A huge number of new and used car buyers in the UK are making their vehicle purchase on finance of some sort. It might be in the form of a bank loan, finance from the dealership, leasing, credit card, the trusty ‘Bank of Mum & Dad’, or myriad other forms of finance, but relatively few people actually buy a car with their own cash anymore.

A generation ago, a private car buyer with, say, £8,000 cash to spend would usually have bought a car up to the value of £8,000. Today, that same £8,000 is more likely to be used as a deposit on a car which could be worth many tens of thousands, followed by up to five years of monthly payments.

With various manufacturers and dealers claiming that anywhere between 40% and 87% of car purchases are today being made on finance of some sort, it is not surprising that there are lots of people jumping on the car finance bandwagon to profit from buyers’ desires to have the newest, flashiest car available within their monthly cashflow limits.

The appeal of financing a car is very straightforward; you can buy a car which costs a lot more than you can afford up-front, but can (hopefully) manage in small monthly chunks of cash over a period of time. The problem with car finance is that many buyers don’t realise that they usually end up paying far more than the face value of the car, and they don’t read the fine print of car finance agreements to understand the implications of what they’re signing up for.

For clarification, this author is neither pro- or anti-finance when buying a car. What you must be wary of, however, are the full implications of financing a car – not just when you buy the car, but over the full term of the finance and even afterwards. The industry is heavily regulated in the UK, but a regulator can’t make you read documents carefully or force you to make prudent car finance decisions.

Financing through the dealership

For many people, financing the car through the dealership where you are buying the car is very convenient. There are also often national offers and programs which can make financing the car through the dealer an attractive option.

This blog will focus on the two main types of car finance offered by car dealers for private car buyers: the Hire Purchase (HP) and the Personal Contract Purchase (PCP), with a brief mention of a third, the Lease Purchase (LP). Leasing contracts will be discussed in another blog coming soon.

What is a Hire Purchase?

An HP is quite like a mortgage on your house; you pay a deposit up-front and then pay the rest off over an agreed period (usually 18-60 months). Once you have made your final payment, the car is officially yours. This is the way that car finance has operated for many years, but is now starting to lose favour against the PCP option below.

There are several benefits to a Hire Purchase. It is simple to understand (deposit plus a number of fixed monthly payments), and the buyer can choose the deposit and the term (number of payments) to suit their needs. You can choose a term of up to five years (60 months), which is longer than most other finance options. You can usually cancel the agreement at any time if your circumstances change without massive penalties (although the amount owing may be more than your car is worth early on in the agreement term). Usually you will end up paying less in total with an HP than a PCP if you plan to keep the car after the finance is paid off.

The main disadvantage of an HP compared to a PCP is higher monthly payments, meaning the value of the car you can usually afford is less.

An HP is usually best for buyers who; plan to keep their cars for a long time (ie – longer than the finance term), have a large deposit, or want a simple car finance plan with no sting in the tail at the end of the agreement.

What is a Personal Contract Purchase?

A PCP is often given other names by manufacturer finance companies (eg – BMW Select, Volkswagen Solutions, Toyota Access, etc.), and is very popular but more complicated than an HP. Most new car finance offers advertised these days are PCPs, and usually a dealer will try and push you towards a PCP over an HP because it is more likely to be better for them.

Like the HP above, you pay a deposit and have monthly payments over a term. However, the monthly payments are lower and/or the term is shorter (usually a max. of 48 months), because you are not paying off the whole car. At the end of the term, there is still a large chunk of the finance unpaid. This is usually called a GMFV (Guaranteed Minimum Future Value). The car finance company guarantees that, within certain conditions, the car will be worth at least as much as the remaining finance owed. This gives you three options:

1) Give the car back. You won’t get any money back, but you won’t have to pay out the remainder. This means that you have effectively been renting the car for the whole time.

2) Pay out the remaining amount owed (the GMFV) and keep the car. Given that this amount could be many thousands of pounds, it is not usually a viable option for most people (which is why they were financing the car in the first place), which usually leads to…

3) Part-exchange the car for a new (or newer) one. The dealer will assess your car’s value and take care of the finance payout. If your car is worth more than the GMFV, you can use the difference (equity) as a deposit on your next car.

The PCP is best suited for people who want a new or near-new car and fully intend to change it at the end of the agreement (or possibly even sooner). For a private buyer, it usually works out cheaper than a lease or contract hire finance product. You are not tied into going back to the same manufacturer or dealership for your next car, as any dealer can pay out the finance for your car and conclude the agreement on your behalf. It is also good for buyers who want a more expensive car with a lower cashflow than is usually possible with an HP.

The disadvantage of a PCP is that it tends to lock you into a cycle of changing your car every few years to avoid a large payout at the end of the agreement (the GMFV). Borrowing money to pay out the GMFV and keep the car usually gives you a monthly payment that is very little cheaper than starting again on a new PCP with a new car, so it nearly always sways the owner into replacing it with another car. For this reason, manufacturers and dealers love PCPs because it keeps you coming back every 3 years rather than keeping your car for 5-10 years!

What is a Lease Purchase?

An LP is a bit of a hybrid between an HP and a PCP. You have a deposit and low monthly payments like a PCP, with a large final payment at the end of the agreement. However, unlike a PCP, this final payment (often called a balloon) is not guaranteed. This means that if your car is worth less than the amount owing and you want to sell/part-exchange it, you would have to pay out any difference (called negative equity) before even thinking about paying a deposit on your next car.

Read the fine print

What is absolutely essential for anyone buying a car on finance is to read the contract and consider it carefully before signing anything. Plenty of people make the mistake of buying a car on finance and then end up being unable to make their monthly payments. Given that your finance period may last for the next five years, it is critical that you carefully consider what may happen in your life over those next five years. Many heavily-financed sports cars have had to be returned, often with serious financial consequences for the owners, because of unexpected pregnancies!

As part of purchasing a car on finance, you should consider and discuss all of the various finance options available and make yourself aware of the pros and cons of different car finance products to ensure you are making informed decisions about your money.

Stuart Masson is founder and owner of The Car Expert, a London-based independent and impartial car buying agency for anyone looking to buy a new or used car.

Originally from Australia, Stuart has had a passion for cars and the automotive industry for nearly thirty years, and has spent the last seven years working in the automotive retail industry, both in Australia and in London.

Stuart has combined his extensive knowledge of all things car-related with his own experience of selling cars and delivering high levels of customer satisfaction to bring a unique and personal car buying agency to London. The Car Expert offers specific and tailored advice for anyone looking for a new or used car in London.

How to Get Great Car Financing Plans

The thrill of getting a new car, especially if it is your first one, is definitely incomparable and inexplicable. But the burden of paying for the car is not. This is why many people rely on car financing. Car financing or car loans are perhaps the most common kind of loan today. But despite this, many people still do not know how to shop for these types of loan plans. Here are some ways to get great auto financing plans to help you enjoy your car even more, knowing that you bought your car getting the best deal available.

Know where to shop:

In order to get the lowest interest rates, you need a good credit history. But what if you do not have the best credit history? Worse, what if your credit history is actually bad? Fortunately, there are car financing plans for people with bad credit or no credit history at all. The interest rates may be higher than the standard plans, and the financing plan may require a down payment, but it is definitely better than nothing. Of course, not all dealers allow people with bad credit to get this type of car finance plan, so it is best to look around. The best place to shop for bad credit car financing plans is on the Internet, where you can easily compare prices. Even if your car dealer has an in-house financing department that can accommodate your needs, it is best to search before you settle.

Foresee future cost

Many buyers choose cheap car financing plans upfront, without checking if the plan is indeed cheap. This is because the total cost of the plan may be more than the actual worth of the car, even if you consider interest rates. When shopping for auto financing plans, it is best to go for loans that may not seem so cheap now but can actually help you save money in the long run.

Know your limits

Of course, since we are talking about car financing plans you are not going to pay for the car in full. However, are you sure you can really pay for the car in the long run? It is always best to know your limits financially. Track your budget to see if how much your car finance plan payments would be for the car you would purchase. In a way, this tip compliments the previous one. You should know your financial limits for the long run, possibly until you are done paying for the car loan.

Avoid penalties

Some car financing plans have penalties, but they are often not called “penalties” in the fine print. To understand the contract better, employ the help of a legal expert. Also, choose plans that give you the option to pay extra payments, or pay the entire loan without any penalties of any sort. When choosing a car financing deal, go for the most flexible plans. Your budget is not static, and your financial status can change, for better or worse. You need the flexibility to keep up with your payments.

How To Attain Exotic and Classic Car Financing

Financing the car of your dreams is more complex than financing your next family SUV. The value of a classic car has so many variables, many typical auto lenders aren’t equipped to appraise them correctly. Fortunately, there are specialty classic auto loans that are available. These car loans typically offer longer terms, better rates and a better understanding of the classic car market.

Deciding to Finance

Choosing whether or not to finance your classic or exotic car is a personal decision. However, the classic car market is very strong and many models appreciate at 10 percent or more a year. Classic car financing comes at a much lower rate, so financing the car will cost very little in the long run. The car finance industry makes it easy to take advantage of these exotic investment opportunities, even if you don’t have the cash to pay outright for a collectable car.

Factoring in Costs

Buying a these car isn’t like buying a regular car. Many lenders require an inspection and appraisal before they’ll issue classic auto loans. The cost of this appraisal should be factored into the loan. The appraisal is very helpful for you as the buyer as well. The appraiser will determine whether you’re buying a truly original car and whether there are any problems the seller didn’t declare. You may also want to factor the travel and shipping costs into you loan to make sure your new car isn’t left stranded on the other side of the country!

Make Sure You Can Get a Title

A title to the car is very important for all auto loans, but there are eight states who don’t issue titles for classic cars. If you live in a state that doesn’t issue titles, you’ll struggle to find financing from classic car lenders or regular auto lenders. If you have found your car before shopping for a loan, you may want to obtain a copy of the title before applying – this can help speed up the approval process.

Get Pre-Approved

Getting pre-approved is a great way to find your budget and to save time so you can purchase a vehicle quickly once you find one. To get pre-approval, you’ll probably need at least 20 to 30 percent of the value on hand as a down payment. Knowing your credit score will also help. People with low credit scores may be asked for a larger percentage as a down payment than those with better credit scores.

Use A Classic Car Lender

Choose a lender in the classic car finance industry. General auto loan companies will struggle to offer competitive rates on these cars because they don’t understand the true value in the vehicle. They may also require larger down payments and only offer the standard auto finance length of five to six years. A great car financing company will offer competitive rates and offer terms up to 12 years – lowering your monthly payment.

Financing a classic car should be treated more like buying a house than buying a regular car. You have the option of using one of many car lenders, instead of only picking the terms the dealer offers you. Take the time to get pre-approved and talk to the right lender. They’ll use their experience in car financing to lead you through the process of buying your dream car.