Guide to Buying a Car on Finance
Finance is becoming an increasingly popular way for people to buy cars, as it’s simpler, more affordable and more manageable. But if you don’t really understand what car finance is, the options you have available to you or how to apply it can be confusing, which is why we’re going through it for you.
Your car finance options explained
The first place to start is to identify which car finance options are available to you and which one is the best choice.
Hire Purchase
The cost of the car is spread out into fixed monthly repayments. When you pay the final instalment, you own the car. Monthly payments are higher than that of PCP though.
Personal Contract Purchase (PCP)
Again, you’ll have fixed monthly repayments but they’ll be lower as a portion of the car’s value is deferred to the end of the agreement. When the contract comes to an end, you can either pay off this final lump sum amount (also referred to as a balloon payment) to own the car, or trade it in for a new car or return it.
Personal Contract Hire (Leasing)
This is exactly as the name sounds, you’re essentially hiring or renting a car for a certain period of time. It’s normally only available for newer models of cars, and you’ll often have a mileage limit and wear and tear clause to abide by. You also have to return the car at the end of the agreement, with no option of buying it.
Consider your credit score
When buying a car on finance, lenders will instantly look at your credit score when reviewing your application.
Your credit score can show them what type of customer you’ll be by seeing whether you make repayments on time, if you have any outstanding debt and overall if you’ll be a reliable borrower.
In essence, the better your credit score, the more likely you are to be accepted for car finance. That being said, you still need to make sure you’re able to afford the monthly repayments if you’re borrowing a larger amount, as failure to miss payments could result in your car being repossessed.
Understand interest rates
The interest rate you’re given depends on your credit score; the better your credit score, the lower your interest rate.
The APR is the interest rate charged for you borrowing the money to buy the car. The longer the loan term, you’re likely to pay more interest even though you’ll have smaller monthly repayments. It’s not just about the monthly repayment figure.
Finance your car with Hilton Garage
It’s easy to finance your next car with Hilton Garage. You can start by getting a free finance check online on the car you’re interested in. You can also see finance quotes from our various credit partners on your chosen vehicle page, to get an idea of interest rates and monthly repayments.
Once you apply and have been approved, we’ll sort all the paperwork on your behalf, and arrange to have your new car delivered to you, or for you to collect from our dealership in Derby.
Contact our team today if you have any questions about finance or how to finance your next car.