Many people around the world choose to buy brand new, nearly new or used cars for a variety of different reasons. Brand new cars offer a number of benefits to their owners, such as not being owned by other people in the past and having a slim to none chance of breaking down during the first few years of ownership.
Nearly-new cars represent excellent value-for-money to those that want to be able to drive away from the car dealer’s showroom in a car that is less than 12 month old and has a small amount of miles on the clock but is still new enough to have that “new car smell” and perhaps more importantly, the reliability of a brand new car but not the depreciation of one!
And then you have used cars. Whilst they might not always be as reliable as brand new or nearly-new cars, they are considerably cheaper to buy than both of those options, making it an attractive proposition to those who want to spend as little money as possible on their motoring costs, or perhaps cannot afford the luxury of driving around in a brand new or newish car.
But what the vast majority of car buyers do that buy any of these types of car, is to pay for their new automotive purchases with a finance agreement of some description.
What is car finance?
In a nutshell, car finance refers to the practise of a financial institution lending a person some money to buy a car. This is usually done by a finance company rather than a traditional lender such as a bank, and the loan is secured against the car, rather than an unsecured loan that one might typically obtain from their bank.
Although a lot of people would attempt to borrow money from their bank, the problem is banks around the world are somewhat nervous about lending money to people due to the global economic crisis from the last decade, which was caused in part by people borrowing above their means.
This has meant that lenders have tightened up their lending criteria, and will typically only lend money to people with unblemished credit histories. So if you’ve been behind on a couple of your financial commitments in the past, you are more likely to be declined for an unsecured car loan from your bank.
Car finance, on the other hand, is much easier to obtain because the loan is secured against the car. This means if your payments to the finance company are irregular, they have the power to repossess the car from you, auction the car off and make you pay for any difference between what the car sold for and what you have paid so far.
Obviously you would not want to take on a car finance agreement unless you can absolutely guarantee that you would be able to afford to pay the car, even if things went wrong, so assuming that you have done your sums and can categorically state that you can afford to buy a car on finance, here are 7 top tips to help you get guaranteed finance!
1. Make sure your credit score isn’t bad
Although obtaining a car finance agreement is easier than obtaining an unsecured loan, Carfinance247.co.uk recommends that you make sure your credit score is in tip-top condition before applying for anything.
Even if you’ve got no adverse credit history, some people discover that they may have been the victim of identity theft, so it’s important to deal with any potential credit score problems first.
2. Consider having a guarantor
If you haven’t had a great track record with borrowing money in the past, or perhaps you haven’t ever borrowed anything, you might be declined car finance. In such circumstances, it would be advisable to consider having a guarantor.
A guarantor is basically someone that will agree to pay the car finance on your behalf if you can’t for whatever reason, and will increase your chances of getting car finance.
3. Don’t apply for car finance if you’ve been made bankrupt
If you have recently been made bankrupt, then it is for a reason; you obviously could not meet the terms of your previous financial arrangements because you likely couldn’t afford to pay for stuff anymore. In this case, I would strongly recommend that you do not apply for car finance, as the chances of you being accepted for a loan are slim to none.
4. Put down a big deposit
One of the best pieces of advice I can give you about guaranteed acceptance of car finance is to put down as big a deposit as possible on your next car purchase! After all, the more you pay upfront, the less you have to borrow.
5. Self employed? Be prepared to prove your income
I won’t lie to you; you are more likely to be accepted for car finance if you are in full-time employment rather than if you are self-employed. But the news isn’t all doom and gloom, because if you can prove that you are earning a decent amount of money each month, such as with bank statements, lenders will take this information into consideration.
6. Sell your existing car privately
Following on from point 4 (putting down a big deposit), I would highly recommend that you sell your existing car privately rather than trading it in. The reason for this is simple; you will get more money for your car this way!
7. Make sure you can prove where you live
One thing that can become a potential stumbling block for many people hoping to obtain car finance is not being able to prove where they live! You must ensure that you are on the electoral roll for where you live, and I would also advise that you live in the same address for at least 3 years, as this will prove you aren’t likely to drive off into the sunset with the finance company’s car and not pay any money for it!