Car finance-what’s a good interest rate

2babyboys

Hello, I have been offered 10.9% APR for car finance.  Is this a good offer please?  Don’t think I’ll get a loan until Feb onwards due to credit file.  Thanks

cymruchris

It may or may not be a good offer.

Let's say the car is a 2015 Ford Focus - and your retailer is offering the car at £10k - financed at 10.9% over 3 years with no deposit.

So that's roughly £326 a month - £11,768 repaid.

There's another dealer down the road that also has a 2015 Ford Focus - but their finance is 13% with no deposit- however their car is priced at only £8k for exactly the same model/similar mileage. 

So that's roughly £270 a month - £9703 repaid. 

Your retailer - cheaper APR - more expensive price tag - more paid overall.

Another retailer - more expensive APR - cheaper price tag - less paid overall.

In essence it's not JUST the APR you should be looking at - it's the price tag of the car compared to equivalent year/model/specs available elsewhere.

Some places offer 'cheap finance' but 'inflated prices' - so make sure you are getting 'cheap finance' on 'appropriately priced cars'. 

fatbelly

Make sure you understand what sort of finance this finance is. If it's hire purchase it should state that.

I'd say apr 10.9% is typical for hp. Neither good nor bad

CliveOfIndia

Two very good points made by the previous posters.  It's also worth remembering that any form of credit will take into account your credit history - whether that's a dealer's finance offering or a straightforward personal loan.  Someone with a tarnished credit history will generally be offered a higher APR than someone with a perfect history, all other things being equal.

A dealer's finance package may be more accessible simply due to the fact that it's secured against the car, whereas an unsecured personal loan isn't.  But if you say your credit history has had some issues in the recent past, is it a good idea to be taking on further credit?

Sorry, that's not meaning to sound judgemental, and obviously I don't know your current circumstances.  But I'm just offering it as something to think carefully about.  Taking on credit to buy a depreciating asset always needs careful consideration.

2babyboys

Hi - good points thank you.  My rough patch was 6 years ago due to a breakdown around a serious health diagnosis and then a bereavment.  Since then I had a 40% salary increase and savings pot, so complete change.  Thank you all

DullGreyGuy

2babyboys said:

Hello, I have been offered 10.9% APR for car finance.  Is this a good offer please?  Don’t think I’ll get a loan until Feb onwards due to credit file.  Thanks

If you dont think you are creditworthy for a loan for the same amount at all then 10.9% seems not a bad rate. Have you done a soft search to confirm a conventional loan isn't an option for you rather than just assuming?