Used Car Finance

For a long time we have seen the car finance market flourish. With low unemployment, positive financial futures and a general feeling of financial security, there have been so many car loans available that almost anybody could get car finance. Then along came the biggest economic downturn for many years, and the brakes have been well and truly applied to the global economy and in particular lending markets.

What does this mean to the regular person on the street who wants to borrow money a new car? Well the main difference that has happened is that lenders have tightened their lending criteria. Due to economical uncertainty, higher living costs and higher forecast of unemployment, lenders are more cautious with who they will lend money too. They feel the risk of defaults is higher, so they are more careful when approving loans for cars, boats, trucks and other equipment.

The follow on affect from this is that the amount of brokers who can get you a cheap car loan has now shrunk dramatically. This is particularly true when the loan being applied for is a non standard loan. Bad credit loans, self employed loans, no deposit loans and other non conforming car loan options have become harder and harder to qualify for.

Many of the major lenders, such as banks and big finance companies, now restrict the number of non conforming car loans they are offering to the market and particular brokers each month. So A large number of finance brokers find it very difficult to exist in today’s environment. They simply cannot place a high enough volume of loans to make ends meet.

This reduction in competition might sound bad for the consumer but it is not necessarily the case. It has become more important for those to do their homework. Interest rates are no higher than before, as long as you can find the right broker to place your loan. It is still likely to be more expensive to go directly to a bank or lender directly.

One trap to avoid is to resort to disreputable lenders or ‘fantasy loans’ that claim to be offering 0% interest, or two years interest free. Nobody lends money for free and you should be aware of that from the beginning. Any loan mentioning such offers have a catch, potentially a very costly one. You should stick to established respected lenders who can still offer a wide enough amount of car finance options to suit your situation. One that can evaluate your financial situation and future economic position to and then suggest the cheapest loan option available for the car you would like to buy.

When working out how much you can afford to borrow, more variables should be considered than just the interest rate. You need to allow for the the other necessary costs of registration, car insurance, any other necessary insurance, running costs, possible repairs, the potential of rising oil prices, and any administration cost associated with the loan.

These costs should be included when calculating the amount of your monthly. This will help you calculate how much you can afford to borrow and also prepare you in advance for changes to your daily budget.

A good car loan broker will have a wide variety of loans based on your economic position. larger their panel of lenders they can utilise or the bigger, better quality their borrowers are, the better opportunity you have to get a good loan. Smaller brokers in the current finance market will always it increasingly more difficult to place a loan that is actually right for you, and may convince you to take a loan because it is one they still have the ability to sign.

One word sums up the current world economy… erratic. This means you should also be searchingfor a flexible loan, especially for new cars. Check the conditions if you want to pay off your car loan in a lump sum or refinance to a different car loan.

Having a loan already approved for the amount you want to borrow also gives you more buying power when you go to buy your car. You know your limits and the seller will need to negotiate to meet you demands. It will also take away their ability to trick you into using finance companies they are associated with, whose conditions may not be suited to you.

It is more important than before to do your homework when applying for a car loan. Stick to the trusted established brokers with strong financial backing and avoid offers of free finance or convenient convenience loans with lots of fine print and conditions.

Car loan interest rates can vary for several reasons other than just what the base interest rate is on the day you take the loan. There are different types of car loan, and if you take a standard loan from a bank you will not always find it the cheapest way to borrow money to buy a car. In fact you are more than likely to find it the most expensive way, other than using loan sharks or very expensive short-term loans.

When you are buying a car you have several factors to take into consideration, including the make and model, the engine capacity and what the auxiliary costs of running it are. And that’s without even considering the price of the car and how you are going to finance it, let alone the car loan interest rate. These auxiliary costs include the road license and your insurance, assuming you want more than the minimum that comes with the Reggo.

However, the most important is the finance for your car, unless you have the readies to pay cash. Most people don’t, so they will be looking for a car loan and comparing interest rates. One tip is to get the loan organized before buying the car. This might sound a bit insane, but many dealers will sell you the car, telling you that the finance isn’t a problem. They can sort that for you! Only thing is, once they sort it, it’s the interest rate that’s insane, and you would have been saner getting your car loan agreed before you went anywhere near the dealer.

Don’t believe the teaser 0% finance deals. Nobody is going to lend you money at 0% interest. It’s the same with ‘pay nothing till September next year’ deals or ‘pay nothing for nine months’. You often find that after your nine months you have a massive lump sum to pay to cover the interest you haven’t been paying, and if you don’t pay that you are taken to court - or you could even lose the car.

There is no such thing as 0% interest - it’s only when you are going to pay it that has been postponed, and then it’s usually in the form of a lump payment. Make sure you read the small print on dealership loans, or any other car loan that offers you a deal that seems too good to be true. It usually will be!

Try to find a package that that suits you, and check it for any hidden fees or ‘break fees’ for settling up earlier. A good deal should allow you to make extra payments when you can afford it, so that you can pay off the car loan quicker. Just like any other type of loan, your car loan can be secured or unsecured. A secured loan is one that provides security to the lender in case you fail to pay; security can be your home or something else that the lender can use to raise the amount of the loan in the event of you not paying. An unsecured loan generally draws more interest than its secured equivalent, and also possibly high arrangement charges.

The loan company could insist on you having fully comprehensive insurance on your car, and also life insurance so that the loan is guaranteed to be paid if you die during the loan period. You might also have to take out employment insurance in case you lose your job. These are all things that you have to take into consideration in calculating the total cost of your loan.

There are, however, finance companies that do their best to ensure that you have as easy a ride as possible through the car loan minefield, and provide you with all the help you need to get a deal that suits you and enables you to tailor your car loan to your own personal needs. They can carry out encumbrance checks, for example, that make sure that there no outstanding loans against the car you are purchasing that could cause problems for you. They will also make sure that the person selling the car is the real owner - you would be surprised at how many cars are sold by people that don’t actually own them. Or perhaps you wouldn’t be!

Perhaps you would like your first payment to be delayed, or make car loan interest only payments to start with until you are earning more money. You can get these from dealerships, but when the extended period is over so is the honeymoon: you suddenly find yourself with a massive bill that includes all your back payments. A good car loan deal will not do this, and your interest rates will not suddenly increase once the deal period has finished. You could also arrange a balloon payment, where you pay less at the beginning of the loan, and then a final payment once you have earned enough and saved enough to pay it. Many people finance the balloon payment through an insurance policy that matures when the final loan balloon payment is due.

If you can arrange a car loan interest rate that is fixed for the entire period of the loan, you will know exactly what you are paying irrespective of any interest changes due to factors outwith your control.

Car loan interest rates can seriously affect not only your ability to pay, but also your future if they change during the period of your loan. Make sure that you find a good reputable loan company that is sympathetic to your needs, and you are certain will not change the rules when the economic climate changes.

It is not just the car loan interest rates that can cause you to have to pay much more for your loan than you originally arranged, but also a poor choice of lender. There are good and bad lenders, so make sure that you choose one that is sympathetic and that you and they are able to be flexible according to changing financial conditions.