Car Finance Affordability

RollDeep

Never bought a car on finance before, but I would like to know how the finance companies assess you're financial state.

For example, mortgage lenders will lend you 4x your annual salary. Do finance companies have a similar system, or is it all based on credit rating?

forgotmyname

Nt really. Every company will have their own set of rules.

If you actually need a loan then they see you as a risk and the interest rate increases. If you have lots of money and dont need a loan the rates will be very low. Your less of a risk.

Finance on a car is the only bit that lasts forever.

Save up for a few weeks and buy something with the money in your pocket.

worried_jim

Just get a loan form the high street, it will be be a lot easier then you can be a "cash buyer" at the garage. Tesco are charging 6.1% at the moment- will your garage be able to beat that?

RollDeep

Jim,
as you say, a loan is probably better. Though my question still applies I guess; how does a bank work out how much it will lend you?

forgotmyname

Probably take your left over cash at the end of each month.

Then deduct the loan payment + insurance+ tax+mot+servicing and other running costs.

That will leave you with the balance of your wages. If thats not a reasonable amount then they will want to bung the rates up or ask for a guarantor.

jaydeeuk1

Finance on a car is easier to get than a loan if you have a below average credit rating, as the car is owned by the finance comp, and rates usually a little higher than a high street loan. Please don't say you're going to car craft....

dragonsoul

im not that good with money, no where as good as some of the people here, but one i do know is cars, i was car trade for many years.

if i was you, it might be worth looking into the "just add fuel" deal by Peugeot. this will depend on whether you have a deposit saved, the area you live in and your age.

on paper it looks expensive, i think from memory it works out at around £120 per month for a basic model, but its a hire scheme, so you never own the car. i know so far what im saying looks bad, but bare with me

now take into the factor that these cars will be around 8k to buy new, you only have to take a contract for 12 months, you can extend this etc

so add up your £120 a month over 12 months making £1440 (a new car will depreciate at least that in 12 months in my opinion

then add these factors, the "just add fuel" deal is just that, in your monthly payment you road tax is covered too, also, and this is the best part, your insurance is also covered, so depending on age and location this could save you money too.

now the downside is that you do not own the car, but that might be a blessing, as this deal also covers servicing and repairs. so if the car gets some big repair bills, they are not your problem

so, if you work this out over 3 years on an 8k valued car you will end up paying £4320, i know this is a lot, but over 3 years the is going to depreciate by a good 3K, then add 3 years tax, serving, repairs, insurance, and then add in the "what if" factors, the odd puncture, a few repairs i wouldn't be surprised if you added depreciation, servicing, repairs, insurance, tax and if you have the car that long the dreaded first mot, you may find yourself quiet a bit better off

i must add now, that i haven't looked at the site for a while, and things may well have changed, so please do hold me to this

forgotmyname

£120 a month? 107 starts at £185 a month on their website, Or £253 if your 21.

Dont forget the " Subject to mileage and condition " clause..

And the minimum no claims and maximum of one conviction etc etc etc.

For the equivalent of 1 years payment on that 107 i bought my car and another 4 months of payments worth to run it for 2 1/2 years.
So ive got a years worth of free motoring and its still worth £1000+ if i needed to sell it.

Dont forget to ask the what if you need to return it before the term is up. Will they let you?
If you lose your job you dont want to have to find £185 a month to keep paying for a car you cant afford to use.

thegirlintheattic

You may not get the best deal with cash. Many dealers want fiance customers as they get a hefty commission.