Top 5 benefits of getting a car on finance

Photo by Antoni Shkraba:

Car finance is one of the most popular ways to fund your next car purchase. Many drivers choose car finance as you can spread the cost of getting a car and also get a better can than you would with cash alone. But if you’ve never had a car on finance before, you may be wondering how it could benefit you. The guide below looks at the different ways in which a car finance deal could benefit you and few things you should know before you start applying. 

How does car finance work? 

Car finance is when you borrow money from a lender either in the form of a loan or secured against the vehicle. There are three types of car finance agreement which tend to be the most popular. They all differ in structure, and you may be suited to one form of finance over others. It can be good to check out hire purchase, PCP, and personal loans before you start applying to see which is right for you. However, each agreement allows you to get a car and pay for it in affordable monthly instalments until the end of the agreed term. You can choose a term that suits you, but most car finance agreements are spread over 3-5 years. 

What are the advantages of getting a car on finance?

There are a number of reasons why drivers choose to finance their next car.

  1. Spread the cost

Car finance is a good idea if you don’t have enough cash to get a car. Cars can cost thousands of pounds to buy and not many drivers have this kind of money to pay outright. Car finance then allows you to pay for a car in affordable monthly payments. Most car finance deals also come with a fixed interest rate and monthly payments, so you know exactly what you’re paying for the duration of your loan and your payments won’t change during the agreement.  

  1. No deposit needed

Some car finance agreements do require you to put down a deposit at the start of the agreement. However, due to the popularity of no deposit car finance deals, more lenders than ever are offering 0% deposit contributions. If you’re struggling to get approved for car finance, it could be a good idea to have some money to put down at the start of the loan. This is because it can help secure the deal and also reduce how much you need to borrow from the lender. However, if you do need a car in a hurry, a deposit is usually not needed. 

  1. More accessible in recent years

There are many car finance myths that say you can’t get approved for car finance with differing circumstances. Bad credit for example can make it harder to get approved but it’s not impossible. You could consider improving your credit score in the run up to your car finance application to help get you an easier approval or apply with bad credit friendly lenders. There are also now options for people who receive benefits to get a car on finance and more deals that are suited to self-employed workers too. 

  1. Choose low rates

When it comes to getting a car on finance, your interest rate is really important. It can be possible to get 0% interest, but this usually applies to brand new cars only. If you have bad credit, you may be offered a high interest rate to helps secure the deal. However, you should try to get the lowest interest rate for car finance to make sure you’re not paying any more than you need to. It can be worth taking some time to compare different interest rates offered to help find the one that’s most suitable for your circumstances.

  1. Get a better car 

Car finance allows you to spread the cost of getting a car into monthly payments. This means that you can usually get a newer and better car than you would with cash alone. Even used cars can cost thousands of pounds to buy outright and most drivers don’t have this kind of cash to hand. Car finance makes sense as you can get a newer and better car, albeit a safer one too and pay for it over a term that suits you.