How does car finance work?

JoshB1990

Can anyone give me some information on car finance please? I am looking at buying a new car for around £10000 maybe a little more depending on the car. What do finance companies look at from their applicants? Does a deposit help towards being accepted? If so what sort of percentage of the car price wouldhelp? I know as much as possible but how much is goung to give me a better edge?

chanz4

yes deposits do help, jsut a clean credit file really and working

gingeralan

I don't think a deposit makes a huge difference, may have slight impact on rate you pay. I think you would be most likely to be accepted on a hire purchase agreement where technically you don't own the car till the final payment had been made. This means the finance company has security for your loan.

Check with your own bank, see what they can offer. Most car dealers will be able to source finance for MOST circumstances, not always the best rates though.

vax2002

Every pound you borrow costs the APR rate every year to pay back, so longer terms = more APR.
So If you Loan £1 at 30% APR, you pay 30p a year Interest and the other 22 weeks pay off the loan, the weeks that pay off the loan are added up to the term.

So shortest terms, largest deposit and add nothing on to the finance such as warranties that can be paid cash and any cash back will be paid back many times over.
Also budget for fully comprehensive insurance and Buy gap insurance as if written off, the insurance wont cover half the value of the car once depreciation sets in and if you have no gap insurance you are let with no car and a big debt to pay off.

CLAPTON

JoshB1990 wrote: »

Can anyone give me some information on car finance please? I am looking at buying a new car for around £10000 maybe a little more depending on the car. What do finance companies look at from their applicants? Does a deposit help towards being accepted? If so what sort of percentage of the car price wouldhelp? I know as much as possible but how much is goung to give me a better edge?

the way it works for a 21 year old with 300 a month spare is
-use the savings you have accumulated from the spare 300 per month over the last few years to buy a used car

enjoy

then continue saving for the things you want and buy them when your savings are suffcient

JoshB1990

Do they determine the finance on your age as im 21 but i do have two settled loans already? Do you think it would be better to go for a bank than finance? In a previous post somebody said that nobody would loan that much money to me as its half of what i earn a year? Im on £24000 basic without any shift pay but i want it over 4-5 years

gingeralan

You just need to shop around. Check what your dealer can do. Firstly though haggle on the cash price of the vehicle, then haggle on the rate. Don't get sucked in and let them sell to you on the basis of monthly payment.

After getting this info, ask your bank, or other appropriate lender, see if they can compete with your dealer quote.

Yoyr age will be considered, but don't worry about it too much.

chanz4

gingeralan wrote: »

I don't think a deposit makes a huge difference, may have slight impact on rate you pay. I think you would be most likely to be accepted on a hire purchase agreement where technically you don't own the car till the final payment had been made. This means the finance company has security for your loan.

Check with your own bank, see what they can offer. Most car dealers will be able to source finance for MOST circumstances, not always the best rates though.

I disagree for the following reason. Say a car is worth £10k and you put down £3k deposit, you then go onto make say 2k worth of payments and then default. The car at this point is worth and sells at auction for £6k /5k they have no risk.

gingeralan

chanz4 wrote: »

I disagree for the following reason. Say a car is worth £10k and you put down £3k deposit, you then go onto make say 2k worth of payments and then default. The car at this point is worth and sells at auction for £6k /5k they have no risk.

I'll be honest, I used to work in a car dealers selling finance and additional products. Most of the time it didn't matter if there was a deposit unless there was some special offer like 0%, but this wasusually to place this deal out of reach to most people and get them onto a low or no deposit deal with interest. I got the impression it was always based on affordability, as guide we were told to ensure the monthly payment was not more than a Weeks wages to ensure they were accepted.

Usually the loans are not secured apart from on HP. Therefore if you missed a payment they could not just seize the car. I hopethis makes sense.

CKhalvashi

JoshB1990 wrote: »

Can anyone give me some information on car finance please? I am looking at buying a new car for around £10000 maybe a little more depending on the car. What do finance companies look at from their applicants? Does a deposit help towards being accepted? If so what sort of percentage of the car price wouldhelp? I know as much as possible but how much is goung to give me a better edge?

It depends what you’re buying (e.g new Jag, used Escort), however there is an affordability element and a credit check involved.

HP and PCP/CH are secured on the car, so with both scenarios, using the cars above.

The XF is £43k-ish in cash (I’ve used this as I’ve got one, and I have the finance paperwork in front of me at the moment)

CH: £9000 deposit
£725.84/month for 46 months
£11194.82 optional balloon payment
Cost to own the car: £54484.40

HP: £9000 deposit
£888.07 for 46 months
£0 balloon payment
Cost to own the car: £51,977.36

We’ve chosen the CH option, as I can do 800 miles a week in it, hand the car back at the end, and not have to worry about selling it. Note how at this value, age and even mileage the HP route is cheaper.

I’ve just calculated the figures on the Evans Halshaw website (as that’s where we got the S-Max from), and on some models, it’s quoting PCP/CH cheaper, especially on lower mileage contracts.

The best thing for most people is to buy a cheap, old car, and save the money each month for something newer. £300 of savings each month is an ex-demo in 3 years time

CK

N.B; I am a company director, meaning that the above advice is not suited to all. The lease is held in the company name, not personally, and as such, this is not financial advice.

Edit: I didn’t see you’re 21.

tell_it_how_it_is

A prime example above of how to throw away absolutely s**tloads of money on a car. Be careful with the route you choose.