You are ready to buy a car or you’ve already got your heart set on the perfect vehicle.
But how are you going to pay for it? The most popular way to buy a car these days is through car finance, here’s our complete guide to what it is, how to use it and all the benefits.
What is car finance?
Car finance is a popular option for customers who can’t afford to buy a vehicle outright or don’t want to do so.
It makes cars more affordable by dividing the cost into a deposit and a series of monthly payments.
A big percentage of people choose to buy their used cars through finance.
Trusted companies who offer it include Rockpoint Cars of Distinction in Staffordshire.
Director James Hoe said: “Lots of customers buy their cars on finance.
“It spreads out the cost and means that more people can drive away in their dream car.”
Who provides car finance?
Car dealers work with finance companies and other lenders to offer finance as an option for their customers.
The car is sold to the finance company and you pay that company back in instalments.
How to take out car finance
At dealerships like Rockpoint, a finance application can be made on the website.
Or you can visit and a salesman can fill in the application for you.
Having point-of-sale finance makes the process of borrowing money and buying a car much more straightforward.
James added: “The application is usually approved within an hour and you’re ready to drive off in the car you wanted.”
- Types of finance
- Hire Purchase
- This traditional form of car finance works like a bank loan.
It usually involves a deposit of around 10 per cent then monthly instalments with interest.
At the end of the loan term, you own the car.
PCP Finance (Personal Contract Purchase)
This is very popular these days, particularly with those buying more expensive cars as monthly payments are lower.
It works like a combination of a leasing arrangement and a loan.
The deposit paid is usually around 10 per cent and the monthly payments are based on how much the car is likely to decrease in value.
At the end of the contract, you have the option to make a large final payment to buy the car.
What are the benefits of buying a car on finance?
Convenience
You don’t have to hunt around to find a loan from elsewhere, the dealer you are buying the vehicle from will do everything for you.
No deposit
With some car dealers, like Rockpoint, you don’t even have to pay a deposit to buy a car on finance as they offer a £0 deposit option.
Fixed payments
You know exactly what you are paying and when you are paying it when buying a car on finance.
The payments are fixed and your agreement lasts as you want it to last. There will be no surprise costs or fees.
Better car
When you buy on finance, it allows you to buy a better car and also to change your vehicle more frequently.
A newer car can be more reliable and cheaper to run.
Keep hold of your savings
Instead of spending your savings on a car, you can save or invest your money or spend on other purchases like a holiday or home improvements.
Part exchange
With a finance agreement, you can part-exchange your car for a new one when you are ready.
So, you don’t need to worry about trying to sell a vehicle yourself.
Car finance and your credit score
By keeping up with your monthly payments, you’re proving to future lenders that you can pay your loan back.
That means you should be accepted by more lenders in the future.
But if you miss payments and the lender has to take action against you, your credit rating will be damaged.
Don’t forget that formal applications also appear on your credit history so if you make numerous applications with different dealers, this will have a negative impact on your credit rating.
Rockpoint Cars of Distinction
At Rockpoint, we pride ourselves on stocking the best value, high-quality used vehicles for our customers.
Whether you decide to pay in cash of are eligible for one of our flexible finance options, we have you covered.
See our full range of quality used vehicles here.
Don’t hesitate to contact us with any questions. Email james@rockpointbmw.co.uk or call 01827 283496.