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Car Finance Glossary

December 12, 2018Car glossary

Trying to understand car finance can be confusing, especially with all of the car finance jargon involved which can be difficult to make sense of. Car dealers can prey on the confusion of their buyers and make them think they’ve got a top-quality deal when really, that isn’t the case. If you would like to fully understand as much as you can about car finance before purchasing a loan, read Car Finance Plus’ car finance glossary for all of the information you need.

Read on to see all of our car finance jargon:

A

Agreement

This is a contract between a lender and a borrower which is legally binding and sets out the payment schedule for the loan the borrower is receiving. It shows the exact interest, fees and charges, as well as both sides rights and responsibilities. You should always make sure you are 100% confident you know what you are signing and are willing to be legally bound by all of its terms and conditions.

Acceptance Rate

An acceptance rate is how many applications for a loan have been approved and payed by the lender. The higher the brokers acceptance rate, the more likely you are to be approved for a loan.

APR

This stands for Annual Percentage Rate. It is an overall figure which shows the annual cost for borrowing the money and allows you to compare different finance offers so that you understand the total cost for borrowing the money. 

Arrears

This is a word you will hear when you are behind on your payments. If you are ‘in arrears’, you are behind your payment schedule and will have to pay extra in order to get back on track to the agreed plan.

B

Balance

A net amount, after all payments and charges have come out of your account.

Balloon

A lump sum payment that is paid at the end of some financing agreements. This allows you to take ownership of the car and the amount is agreed at the start of the agreement.

Base Rate

This is the rate of interest set by the Bank of England and determines the lowest rate the lenders will charge interest at.

C

Conditional Loan

A conditional loan is when you agree to buy a car at the beginning of the finance agreement, which means that once you have paid your monthly repayments, the vehicle is yours.

Credit History

This is the record of the credit you have taken out and your repayment of debts. It typically includes credit from banks, credit card companies, governments etc.

Contract Hire

This is a long-term rental agreement which is the same as renting a car for a day or a week. You do not own the car; it remains the property of the finance company at all times.  At the end of the agreement, the car goes back to the finance company, just like a rental car.

D

Default

To default on your agreement means to miss a scheduled payment. Defaulting on your agreement is a breach of your contract and means that the finance company can take action against you if they wish to do so. Most companies will not take action if you are able to make up your arrears.

Deposit

When taking out car finance you sometimes have the option to put down a lump sum at the start of a contract. A deposit is only usually refundable if the contract cannot go ahead.

Depreciation

The amount of money that your car loses as a result of VAT, age, mileage, wear & tear and other factors. The value of your car after depreciation is called the residual value.

E

Equity

Once all of the debts related to your car have been paid off, it then becomes equity because it is now an asset that you own. Negative equity means your car is worth less than what you owe, so there is a shortfall that needs to be paid off in order to sell or part-exchange the vehicle.

Excess Mileage

Certain types of finance agreement will have a mileage allowance for the total duration of the term. You may be charged if you exceed this limit.

F

Fixed Rate

This is a set interest which remains unchanged throughout the term of the finance agreement.

Flat Rate

The percentage you repay the finance company over and above the money you are borrowing. Dealers often refer to the flat rate instead of the APR because it’s often lower, so make sure you are not duped.

FCA

The Financial Conduct Authority. An independent body that regulates financial services in the UK, ensuring consumers get a fair and honest deal.

FSA

Financial Services Authority. The predecessor of the FCA. Some dealers and finance advisors may still refer to the FSA out of habit, but all written information must be up to date with appropriate references to the FCA.

G

Gap Insurance

This stands for the Guaranteed Asset Protection. This is a type of insurance which covers the difference between the original cost of the car and its value when written-off or stolen.

Guarantor

A guarantor is a person that acts as a guarantee of payment, for example a relative may guarantee they will pay your loan should you not be able to but means you can be putting someone you trust in to a sticky situation if you decide not to make any payments.

H

Hire Purchase

The Hire Purchase is a popular form of finance agreement.  The interest rate is fixed for the full term, and the amount borrowed is spread equally into monthly payments until the Total Amount Payable is repaid.

I

Interest Rate

This is the price added on top of the money you borrow. Interest rates often rely on your credit history. This is different to a fee, which is payable in one lump sum.

Inflation

This is an increase in prices and fall in purchasing value of money.

J

Joint Application

It’s possible to apply and sign a finance agreement with two or more people. Together, they are responsible for repaying the loan or finance agreement.

L

Lease Purchase

A lease purchase is a contract where you own the vehicle, making several monthly payments at the beginning of the agreement and pay a large payment (balloon) at the end of the deal. The deferred payment will depend on the age and mileage of the car as the contract comes to a close.

Lease purchase is one of the least popular contracts people in the UK go for. However it can be beneficial if you are looking to purchase a luxury car as the value of the vehicle will not depreciate over time. You also can avoid any upfront fee and have ownership over the car after the balloon payment is made.

Lending Agreement

A contract between a lender and yourself where they come to an agreement regarding the setup of the loan.

Loan Term

The period you have to repay your loan.

M

Maintenance

The process of preserving the car in the best possible condition. Often lease agreements give a buyer the choice to add servicing costs as another monthly payment. Overall, the total costs of spending will increase but spreads the servicing costs over time and avoids you from making a large sum of payment when your car requires servicing.

Mileage Allowance

You are entitled to a mileage allowance if you have your own vehicle and use it for business journeys. However, you cannot qualify for mileage allowance if you use a company car. The total payment of mileage allowance is determined how old the vehicle is and how many miles they used. Be warned that you will be charged a penalty fee of around 10 – 20 pence per mile that you exceed the mileage allowance.

N

Negative Equity

Negative equity is where the car is worth less than the value you owe to the finance company – also referred to as an “upside down” loan. Despite selling your vehicle, you are unable to pay off the remaining loan amount. For example, if the loan is settled at £10,000 but your car is only worth £7,000, you have £3,000 negative equity.

Negative equity can occur when the car is losing its value at a faster pace than you are able to repay the loan. The finance company may detect a flaw in the car, causing the value to fall rapidly.

O

On-Road Price

The total compulsory cost you pay to use your brand new car on the road. The total price includes the delivery fees, vehicle registration fee, cost for printing your number plates, and road tax. The first year cost of the road tax depends on how much CO2 the new vehicle emits.

Option to Purchase Fee

The option to purchase fee is the remaining balance you need to pay at the end of the contract to gain full ownership of the vehicle. Once the fee is made, the vehicle ownership transfers from the finance company to the customer.

Overpayment/Additional Payment

In addition to the regular monthly payments, you have a choice to make extra payments to the financial plan. The benefits of making an overpayment each month is that the Total Amount Payable is reduced and/or the Term length is shortened and/or your Monthly Payment amounts will decrease.

Please keep in mind that several finance companies may charge a penalty fee if you opt for this payment method.

P

Personal Loan

A personal loan is a type of unsecured loan. With this loan, you are able to borrow money to purchase a car. If you stop making payments in monthly instalments, the finance company cannot take your car. However you may face severe consequences of damaging your credit rating or bankruptcy.

Personal Contract Purchase (PCP)

In the UK, The Personal Contract Purchase, also referred as a ‘Personal Contract Plan’, is a very common approach for individuals to finance a new or used car. You repay the depreciation of the car, and will not need to repay the vehicle at full cost. As you come closer to the termination of agreement, you are able to pay the remaining amount or return the vehicle (Option to Purchase Fee) to the finance company. There is also an option of paying the Option to Purchase Fee and sell the vehicle to a new owner.

Personal Contract Hire

A personal contract hire is specifically aimed to individuals to lease the vehicle. You are able to rent the vehicle, and will not have ownership of the car and the company will take possession of the vehicle when the agreement has terminated.

Payment Protection Insurance

When you cannot make regular monthly payments, Payment Protection Insurance can cover this cost. This tends to not be popular as claiming Payment Protection Insurance is very challenging.

Part Exchange

If you are deciding to purchase a new car, you can trade in your old car and pay less for your new vehicle.

Q

Quote/Quotation

For all car finance companies, the full breakdown of the cost and other relevant information regarding the vehicle must be included on an official written quotation. Usually the quote is valid for 14 days, but the finance company should clearly tell you long the quote lasts for.

R

Re-finance

The payment of a balloon amount needs to be paid at the end of the contract for PCP or Lease Purchase. For some of the finance companies, the time you have to pay the remaining cost can be extended. A downside of re-finance is that additional interest and fees are included, making the overall price for vehicle much more expensive than initially.

Residual Value

Residual Value is the predicted price of the used car and its value over time after careful consideration of the age, mileage and condition. When the agreement has ended, the finance company must predict the value of a car and calculate the depreciation of the car over each year.

S

Specialised Automotive Finance (SAF)

The Finance & Leasing Association regulates a training and testing programme where they ensure the staff at car dealerships acknowledge regulations set by the Financial Conduct Authority regulations about selling finance.

Secured Loan

An agreement where the finance company can take full possession of the vehicle if you do not pay the loan when you stop making payments. In some cases, the finance company may sell the car and still ask for the remaining debt.

Settlement

Coming to an agreement at the end of the contract where the payment covers all outstanding money.

T

Term Length

Term Length describes the payment period you have to pay off the finance agreement. The majority of car finance agreements can last between 1 – 5 years.

Total Repayable

The complete cost of the vehicle, including the loan, interest, total credit and other fees you need to repay the lender.

U

Unsecured Loan

A loan is given to the borrower as their credit is worthy to the lender. The risk of this unsecured loan is lower for you but is a higher risk for the lender. The finance company cannot take your vehicle even after you stop repaying the loan. However they can inflict damage on your credit rating and cause you to go bankrupted. If you have a poor credit score, this option is not the best choice for you.

V

Variable Rate

The variable rate is where the interest rate is not fixed and fluctuates. Thus, your monthly payments of your car may increase or decrease depending on the rates set by the Bank of England.

 

If you are interested in getting car finance, but are not sure whether you will be able to afford it, check out our car loan calculator to see if you are eligible.

The Benefits of Purchasing an Electric Car

November 15, 2018Electric car

Considering the ever-increasing levels of pollution currently being experienced in cities all around the world, many people are seeking modern, affordable ways to help the planet out. If we are able to take steps to protect ourselves, whilst also helping safeguard future generations from the devastating effects of environmental degradation, we should certainly grasp that opportunity with both hands, otherwise things are only going to get worse.

Choosing to drive an electric car over a petrol or diesel vehicle is just one of the many ways in which we can make the future more breathable. There are several options to choose from, which means that you will definitely be able to find an electric car to suit your lifestyle and needs. The evolving technology of electric cars means you will have a driving experience like no other.

There are several advantages to purchasing an electric car over a conventional vehicle. Read on to find out just some of the many benefits.

Electric Car Advantages:

Savings

Electric cars are extremely cheap to charge and many new cars offer great incentives for people to get money back from the government for going green. There are also opportunities to save money in other areas, including lower road tax (now called Vehicle Excise Duty) on many electric and plug-in hybrid cars, which helps make the servicing and running costs cheaper. Moreover, those driving into the Capital are exempt from paying the Congestion Charge and many towns and cities across the country offer free parking for anyone driving an electric car. If you are able to get an electric car through car finance, you will even be able to split up the cost of the payment for the car and pay it off over a certain amount of time and save yourself from having to pay a one-off lump sum.

The running costs are cheaper in the long-run too, since electric cars are run entirely on electricity that its owners provide. This means you will never have to buy an ounce of gas ever again! Fuel-based cars can cost an awful lot, particularly as the prices of fuel continue to reach an all-time high. This can save the regular driver thousands each year. Obviously, electricity isn’t free, but taking all costs in to consideration, an electric car is far cheaper to run.

Likewise, maintenance costs are lower with electric vehicles. We all know that our cars need a bit of tender loving care every now and again, and with petrol and diesel engines accumulating quite the bill for engine maintenance over their lifetimes, electric vehicles do work out cheaper. Truthfully, a petrol or diesel engine is a difficult beast, requiring many additional components to operate correctly, such as exhaust systems, starter motors, fuel injection systems, oil, radiators, gears, and so on.

Pure electric cars, on the other hand, have just three main components; the on-board charger, inverter and motor, and fewer moving parts than cars with an internal combustion engine. This means there are less components which will require regular maintenance and servicing, all of which will save you money.

Better for the environment

It might not come as a shock to you, but electric cars are significantly better for the environment than conventional petrol or diesel cars. Electric cars have no tailpipe emission or exhaust, meaning they do not produce harmful gases which are, in turn, released into the atmosphere. As such, electric cars can help to improve air quality, particularly in urban areas and at the roadside where air quality is normally worse.

Over their whole lifecycle, electric cars have lower greenhouse gas emissions than regular vehicles. Battery manufacture can be then offset by increased efficiency and emissions savings over the life of the car.

Health benefits

Reduced harmful exhaust emissions also means good news for our health, since an improvement in air quality should lead to fewer health problems and the costs associated with air pollution.

We release a variety of chemicals into the atmosphere when we burn the fossil fuels we use every day. This air is then breathed in, which means it has a direct impact on our health. Breathing polluted air puts you at a higher risk of asthma and other respiratory diseases, whilst living in a polluted area can even put people at risk of cancer. Less pollution equals better health for everyone!

Popularity

If you like to stand out in the crowd and always have the quirkiest new gadgets on the market, then perhaps knowing that electric cars are becoming increasingly popular might be a negative for you, but for many it’s a huge positive.

As more and more electric cars find their way onto our roads, we will see the supporting infrastructure around them expand. This can already be evidenced by the fact that there are currently over 4,800 charging locations in the UK, offering nearly 7,500 individual charging points, and these numbers are growing at an ever-increasing rate.

Easy home charging

Imagine never having to visit a petrol station again. Instead, envisage simply plugging in your car when you get home, charging it overnight and it being ready to go for your commute in the morning – that’s it. Your car will always be quietly taking care of itself whilst you sit back and relax. Plugging in takes all of about 15 seconds, which means it’s as easy as charging your mobile phone.

Moreover, those with short electric ranges will not require as much electricity to fully charge the batteries, so that will also cost you less, but you may have to charge your car more frequently than other models. The principle is the same in a car with a small petrol tank – it’ll cost less to fill up, but you won’t be able to cover as many miles as a car with a far larger tank.

Quieter

Enjoy your favourite songs on the radio more than you ever could before, or simply relish in comfort of a noiseless drive, because electric cars are extremely quiet.

If you have been a long-time conventional car driver, your first experience when driving an electric car is almost surreal, since electric engines make almost no noise, which engineers have been perfecting for a long time. The only sound you can hear is probably the muffled hum of tires on road. On the contrary, the noise levels inside a gasoline vehicle can be as high as 75-80 decibels.

Go electric today

Unfortunately, we have been born into a world where the action of one has the potential to affect many, and our mistakes so far have caused environmental pollution which must be quickly addressed. Thankfully, it isn’t too late and many of us are beginning to wake up and admit where we have gone wrong, attempting to reverse some of the damage.

The good news is that every positive action matters – even the smallest amount of effort you put in to create a greener environment can start a healing ripple effect. One of these actions can include making the switch to an electric car in order to cut out the amount of pollution being released into the air around us. Not only does this help the environment and, in turn, our own health, but it also saves you money in the long-run.

The Truth about Car Finance with No Deposit

August 30, 2018Getting a new car can be an expensive and tiring ordeal. With so many different deals out there alongside so many different ways that you can pay for cars, many people get easily confused about the best way to purchase their new car. If you would like to pay monthly towards a car that you will eventually own, without having to pay a massive lump sum towards it at the beginning of the contract, car finance no deposit might be just the thing you are looking for. Many people are unsure whether no deposit car finance deals exist in the real world, or if there are hidden catches that they might be unaware of. If you like the sound of getting a car on finance without paying a deposit, read on to find out more.

No deposit car finance explained

What is it?

When it comes to car finance, you are normally expected to put down a deposit, which you can expect to range from a substantial to a proportionally large amount.  This will then be followed by a series of monthly payments (a term agreed before the contract is signed) and then an extra balloon payment at the end if you wish to take ownership of the vehicle. Then you have the continuing issue of depreciation that has already ravaged your car. With no deposit car finance, you guessed it… you will not have to pay the deposit.

Is it worth it?

Many people are put off of car finance because of the amount of the deposit when that money could be spent elsewhere. Not many people have much spare cash lying around and the amount our old cars are now worth may not even cover the deposit if you look at how much they have depreciated. Many people may need to upgrade if they have another child on the way or if their old car is simply falling apart. If this is the case and you have no money for a deposit then don’t panic just yet. There are some car finance agreements that offer you a chance to get a car without the need for a deposit. You can easily sign up to a finance agreement without a deposit and, if you can afford the monthly payments, you can drive away with ease.

Is it easier to lease a car?

When you get a car through car finance, in most cases, you end up having to pay an amount to take ownership of the car at the end of the contract through a balloon payment, which should take depreciation in to account. In fact, the whole point of a balloon payment is to calculate how much the car will have depreciated by the end of the agreement and then charge you the remaining value of the car. Many people who would rather not pay big amounts towards the car in chunks may think about car leasing. This means that you will not have to pay a balloon payment at the end of the contract. Through a Contract Hire agreement, which is car leasing in its purest form, you lease the car for a period of time, paying monthly amounts and then you simply hand the car back and move on. It is important to remember, though, that if you do decide to lease the car, you will be paying for the car on a monthly basis without ever being able to purchase the car at the end of the contract. Many people, therefore, decide that they would rather pay towards actually owning the car at the end of the agreement instead of paying for it monthly and then having to give it away. These types of people, who think they would like to pay monthly, but not have to pay a big deposit, would be enticed by a no deposit car finance deal.

Is there a catch?

You wouldn’t expect to be able to pay for car finance without a deposit and not have to pay the extra amount in some form or another, right? If you decide to get car finance without a deposit, your monthly payments will, of course, go up. If you place a deposit, your monthly payments will be lowered. The higher the deposit, the lower the payments. There you have it, no deposit car finance can be a great option for people who would like to own their own car one day but are put off by large deposits that could be put to better use. There are numerous deals out there in the car finance industry for people in all sorts of situations; it is just about finding the right one for you.

Credit Scores for Car Loans – What You Need to Know

August 13, 2018BMW Car Wheel

Purchasing a car is a large financial burden, particularly if the vehicle is brand new, which is why many people require some form of loan in order to help offset the costs. However, credit scores for car loans will vary depending upon the provider and their specific rules, with many taking on those with poor or no credit.

We explain the key points you should consider with regard to your credit rating before you begin filling out any car finance applications.

Credit Scores for Car Loans

What is a credit score?

Your credit score, or credit rating, is a number given to you based on your likelihood of paying back the credit you owe. Finance lenders, such as credit card companies, banks and car finance providers will be able to calculate your credit score by looking at your credit history in order to determine how risky you are perceived to be as a borrower. This helps them decide whether to grant a loan to you or not.

Generally, the higher your credit score is, the more likely you are to receive a loan and be accepted for credit, and the better your lending rates will typically be.

Why does my credit rating affect whether I can take out a car loan?

Your credit rating is used to determine how safe of a borrower you are perceived to be. This is the loan company’s way of protecting themselves from people who will not be able to make repayments.

When filling out applications for car loans, the lender will be able to see your credit history, which allows them to determine whether you are likely to repay the loan in future based on your past credit behaviour and whether you are good at managing your debts.

Things taken into account include; how often an applicant has applied for credit, whether payments are made on time, and if anything is owed. Points will generally be lost for things like late payments and defaults, while you will look better if you make payments on time, are on the electoral register and have a steady source of income.

Of course, there are many reasons as to why someone might have a poor credit score and many modern lenders will be willing to take into consideration a range of personal factors when deciding whether to offer you a loan.

That being said, people with bad credit ratings may find themselves on the receiving end of a poor loan contract, or one with a particularly high interest rate, while some lenders will simply reject this type of applicant altogether.

Is there an ideal credit score?

The short answer is that no, there isn’t an ‘ideal’ score that you will need to possess in order to get credit. But, it is obviously the case that the lower your credit rating is, the more difficult it will be for you to get approved for a car loan.

In actual fact, what matters most to potential lenders is the contents of your credit report, which means they will dig further than just your overall score (which varies between companies anyway).

Lenders also take into account your personal application details, such as your income, whether you are on the electoral roll, and whether you’ve taken out a loan with them previously. This means that you may be rejected by certain lenders but quickly approved by others.

Improving your credit rating before taking out a car loan

If your credit score isn’t good at the moment and your need for car finance is not urgent, it is wise to wait until you have steadily improved your score before making an application. Unfortunately, there really is no quick-fix method to improving your score – it simply doesn’t happen overnight.

However, there are several ways in which you can improve your credit score:

CarFinance Plus is able to offer expert advice and tips on how customers can repair or build up their credit scores in order to be accepted for car finance.

Poor credit rating? Do not fear!

Spending time building up your credit rating is a slow process and could take many months (and in some cases, even years), which isn’t always practical, particularly for people who need to get behind the wheel as soon as possible. Thankfully, there are now many finance lenders which are open to offering loans to people with poor credit scores.

CarFinance Plus works with many of the UK’s top lenders and specialises in helping people with poor or no credit get the right car loan deal for their income and budget. We are even able to offer some 0% car finance deals so that borrowers do not need to pay an initial deposit to get behind the wheel.

Managing your car finance

Once you’ve been approved for car finance, it’s important that you are able to manage your repayments in a responsible manner in order to protect your overall credit score. As such, there are several top tips you should abide by:

Cheap Car Finance – Common Questions Answered

July 30, 2018Red Renault Clio

In the UK, a whopping 86.5% of new cars are bought on finance each year. But, despite this glaring statistic, many drivers admit to not fully understanding all the facts surrounding cheap car finance.

For many people, it might be their first time acquiring a car loan, which means that understanding the types of car finance, interest rates, terms of repayment and other factors can be somewhat overwhelming.

We answer the common questions asked, so that you are equipped with all the information you need when deciding whether to purchase a new or used car on finance.

Cheap Car Finance Explained

What types of car finance are there?

The two most popular car finance types are Hire Purchase (HP) and Personal Contract Purchase (PCP).

In HP agreements, the borrower pays an initial deposit of around 10% (depending on the lender) and then pays a fixed monthly instalment, of which the length and repayments are agreed upon beforehand. Once all of these are paid off, the car legally belongs to you. HP agreements can be finished earlier on if the borrower has the funds to pay off the debt remaining on the vehicle.

With PCP loans, an initial deposit is also paid, followed by fixed monthly instalments. At the end of the PCP agreement, the borrower has several options. Including purchasing the car outright using a balloon payment, returning the vehicle or selling it privately.

The final balloon payment will be agreed upon beforehand and is worked out as the estimated value of the car at the end of the loan term, by factoring in depreciation.

Where can I take out a loan?

A very common misconception surrounding car finance is that the borrower can only take out a loan from the dealers of the vehicle. This often means people are taking out bad loans, which are not always the best choice for them. As such, it’s important to shop around and try to find the best loan deal for you and your personal circumstances.

Searching for the best car finance deals should, however, be carried out with caution. If people make a number of full loan applications from several different lenders within a short space of time, this may trigger alarm bells and could negatively impact credit scores.

Instead, it’s best to only carry out ‘soft searches’ when looking for cheap car finance quotes, saving a full application only for the lender which you have decided is best for you, at which point a credit history check will be carried out.

What is the difference between a soft credit check and a hard one?

Two types of credit check exist; ‘soft’ and ‘hard’. A soft search is only a background check and can include a person checking their own credit score, or a pre-approved loan offer. Sort searches do not affect your credit rating.

A hard credit check, on the other hand, will show up in your credit history and can affect your overall score. These will be carried out when full applications are made when applying for loans, so be sure to only make applications with lenders you intend to enter into agreements with.

How long does it take to get finance?

Many traditional finance lenders or dealers will require written personal information before a deal can come to fruition, which obviously would take some time. However, with the rise of many online car finance providers, the process has become significantly shorter and less complex. As such, online dealers can now find quotes in a matter of minutes, and borrowers can fill out application forms very quickly too.

Will car finance affect my credit score?

Another common myth about car finance is that entering into a loan agreement will negatively affect your credit rating. However, the opposite can be the case, especially where a borrower makes their repayments on time, therefore showing lenders that you are a low-risk borrower.

It is, therefore, essential to ensure you only take out a loan which you know you are capable of repaying on time. Keeping your credit score as clean as possible is important for being able to negotiate good loan agreements in the future.

Can I pay off my finance deal early?

Borrowers are certainly allowed to pay off their outstanding debts during their car finance agreements, but this can sometimes mean additional charges are added on. If you intend to do this, make sure you thoroughly check the paperwork on your loan deal before signing.

Can I exit the contract early?

Sometimes, things do not work out as planned and a person’s financial situation can change, which is why Voluntary Termination (VT) may be necessary. This means a person can legally exit their loan agreement earlier on than agreed, but only once 50% of the value of the loan has been paid off.

Whilst each different finance provider will have their own term regarding a VT, in the majority of cases, it should not be an issue, so long as the borrower has been able to keep up with monthly payments and the car is handed back in good condition (if not, extra charges may apply).

In most cases, the borrower won’t have to pay any extra fees and their credit rating should not be negatively affected. However, if a person does invoke their VT right to opt-out early on, this is placed on your file and could mean lenders may refuse to grant you finance deals in the future. An early termination should therefore only be used where absolutely necessary and people are always encouraged to only take out finance deals that they are certain they can pay back.

Am I eligible?

At CarFinance Plus, we receive applications from all types of people, including those with no credit or bad credit, CCJ’s, defaults or payment arrears. Simply make an enquiry and we will see if we are able to help.

Our job is to match people with the right lender based on their personal circumstances, taking into consideration many factors, such as age, income, employment status, credit history and the loan type. Whatever your situation, do not hesitate to apply!

Car Finance Explained: The Complete Guide

July 18, 2018British UK Car FinanceMany of us are finding that we will have to purchase our cars through some form of car finance. Over a million cars were purchased on finance between 2016 and 2017, according to industry figures. Nobody has the funds to be able to pay for a car outright anymore and finance can be found in many forms. Manufacturer franchises, car supermarkets, online retailers and even small used car dealers are able to offer some form of car finance. If you are new to car finance, the options available to you might seem overwhelming and you may ask yourself where you should even begin. Our detailed guide on car finance is easy to understand and will teach you everything you need to know about the finance options available to you. Once you are equipped with this information, you should be able to work out which finance deal is the right one for you.

Car Finance Explained

Credit scores and car finance

If you decide to not buy your car with cash, you are more than likely to purchase your car through finance or credit. By using credit, you are going to be able to get better deals if you have a good credit score compared to if you have a bad credit score. Although, remember that just because you have a good credit score, it doesn’t mean you will be able to afford any amount that you want to borrow. It is imperative to work out all of your incomings and outgoings before deciding how much to borrow through credit.

Personal loan

If you decide to purchase a car through a bank or building society, you are able to spread the cost of the purchase of buying the car between one and seven years. If you haven’t managed to save up enough money, personal loans are one of the cheapest ways to borrow money long term. One of the main problems you may find is that the amount of the monthly repayments can be higher than other options available to you, but it also allows you to own the car right from the start of your loan and the total amount you pay back overall can end up being less than some other methods.

Hire purchase

Hire purchase car finance explained in simple terms allows you to pay a deposit of around 10% and then lets you pay the rest back through a fixed amount of monthly payments over an agreed period. One of the biggest differences between this type of car finance and getting a personal loan is that you will not own the car until you have made the final payment. Hire purchase agreements are set up by car dealers and brokers and the rates are best for brand new cars. You also have certain rights with this type of agreement, which allows you to return the car if you have paid half of the cost and you will not have to make any more payments. You should check the contract to see if this applies to you.

Personal contract purchase

A personal contract purchase is quite similar to a hire-purchase agreement as you will pay an initial deposit, followed by monthly instalments. A PCP is different from other types of car finance because your monthly instalments are paying off the depreciation of the car, and not its entire value, over the course of the term. Then, at the end of the agreement, there will be one final balloon payment that has to be made if you want to own the car outright. Other options you have will be to return the car or use the resale value towards buying a new car.

Personal contract hire

Personal contract hire is a type of long-term rental that will work for you if you are not looking to purchase the car at the end of the agreed contract term and you won’t need to change the car before the end of the contract. You will be able to lease the car for an agreed period of time by making fixed monthly payments. Then, once the contract ends, you will simply be able to return the car. Although, before you are allowed to get a car through PCH, you will need to pass a credit check and pay a few months’ lease upfront or you can be refused car finance. It’s imperative that you have sat down and thought about all of your outgoings before you sign a contract and you are absolutely certain that you’ll be able to meet the repayments for the full length of the contract.

Credit card purchase

As long as your car is over £100 and less than £30,000, you will be able to get extra protection on the full purchase cost of a car if you use a credit card to pay all, or part, of your car’s purchase price. That means you could pay a small deposit of £20 on a car worth £5,000, pay the rest using a debit card, and still have credit card payment protection. You just have to make sure you meet all of your monthly payments in full and on time!

Peer-to-peer loan

This is borrowing and lending between individuals through websites such as Zopa. Somebody who needs to borrow money goes to a company like Zopa and applies for credit. Once approved, the borrower is allocated in to a risk category, which determines the interest rate of the loan you get. Then, that loan is funded by an individual investor who acts as the lender. Although peer-to-peer loans bypass traditional financial institutions such as banks or building societies, you still need a good credit score to get the best rate.

Other options

Paying with cash

Paying with cash can often be the best option when it comes to buying a car compared to buying it with finance. As long as you can pay for other major costs in your life or can prepare for any unexpected future costs, then paying with cash is more than likely going to be the cheapest way to buy a car. The main reason why buying a car with cash is so cheap is because buying a car with cash means that you own it straight away, so if you end up having some form of financial difficulties, you can sell it as soon as possible to get some money.

What to remember

Car finance is a popular option when it comes to purchasing a car and it looks like its popularity is only likely to increase, Santander UK’s car finance lending totalled £940m in the first quarter of 2018, up 8.3% year-on-year. There are many options to choose from when deciding about how to purchase a car. The best thing you can do to make sure you choose the right option for you is simple – lots of research. Make sure you know what you can afford before you choose a car finance route to go down as once a contract is signed, they will be hard to get out of unless stated in the contract itself. It is also important to remember that if you are thinking of selling your car before getting a car on finance, make sure you get as much as you can for it, whether you’re part-exchanging at the dealership or selling privately as you will then be able to pay a larger deposit on the new car you wish to get finance for.

Guide to Buying a Used Car on Finance in 2018

June 14, 2018BMW Used Car

Purchasing a used car is ideal for people who like to snap up a bargain, and finance can be used to help purchase a vehicle in a similar way to new models. However, there are several points to look out for when purchasing a used car from a car dealership or private seller, in order to protect yourself from any extra hassle and unexpected costs down the line.

Key considerations when purchasing a used car

Our comprehensive guide to buying a used car outlines the vital points you should consider, including any relevant vehicle checks to carry out and the documents to ask for from the seller.

1. Have a vehicle history check carried out

We cannot stress enough the importance of carrying out a vehicle history check on any used car you intend to purchase. This will allow you to see if there are any outstanding issues with the car, including whether it is on record as stolen, has been written-off, or if there is any car finance left on the car.

To carry out the check, you must know the registration number, model, make, MOT test number and V5C vehicle registration certificate. Many companies can provide vehicle history check services at different price ranges, however, the cheapest ones may not give you all the essential information needed.

For a relatively minor fee of £20, you can undergo one, single comprehensive HPI check to protect yourself from receiving any nasty surprises later on. For instance, if a car is found to be stolen, even if the person who has bought it was unaware, it will still be taken off them for investigation.

Purchasing a car which has outstanding finance to pay is also a nightmare, as you may not own the car even once you’ve paid for it and you may also become liable for the former owner’s unsettled debt.

2. Do your research

We would always recommend carrying out thorough research to determine the proper market value of the car you want to purchase, so as to avoid overcharging. You can do this by looking at price guides, asking around and comparing the price to other used cars of a similar age, make and model.

Some car dealers or private sellers may not always be completely honest with you about the state of a car they are trying to sell, so it’s important to carry out a comprehensive check of the vehicle before putting any cash down on it, which leads us on to the following few points.

3. Comprehensive car checks

There are many ways you can check the physical attributes of the vehicle you intend to purchase and knowing what to look out for could save yourself a lot of time and money in the long run. Always arrange car viewing on a dry day so you can get a really good look at the car in broad daylight, making it more difficult to disguise any marks or dents.

Don’t be afraid to examine every aspect of the vehicle, such as underneath the car bonnet and under the car for possible signs of accidents or rust. A savvy, smart customer is one who checks the car thoroughly, including:

Car Tyre

 4. Grill the seller

When you go to check out a vehicle, you are also there to check the legitimacy of the seller too. We recommend going with a set of questions on-hand, showing the seller that you are serious and know what you are talking about.

Request to see the MOT certificates and service history, whilst asking questions about the vehicle and all of its features. If the seller does not seem to know anything about the vehicle, this could be a clear indication that it has been stolen.

5. Check the V5C

It is also extremely important to see the up-to-date V5C registration document, also referred to as the vehicle log book, which details all the previous owners of the car, as well as the current owner. The V5C is a vital piece of paperwork which comes with a car and it details all the important information about the vehicle, which is also registered within the DVLA’s database.

When buying a used car privately, be sure to thoroughly check the document in several ways:
Never, ever purchase a car from a seller who can’t or won’t show you a valid, up-to-date V5C!

6. Check the VIN

The Vehicle Identification Number (VIN) of the car is found in several places, including the bottom of the windscreen, beneath the bonnet and under the carpet on the driver’s side, stamped into the framework. This number must match the VIN that is written in the V5C registration document.

7. Take it for a spin 

Provided your insurance allows you to drive another person’s car with permission (Driving Other Cars, or DOC cover), there is no harm in asking the seller to take the vehicle for a test drive. This will allow you to gauge whether there is anything wrong with it, such as the steering, gears, clutch and brakes not working well. You should also be on the lookout for any strange sounds coming from the vehicle.

8. Essential paperwork and parts 

When buying any car, new or used, it is important to ensure that you have all the right documents and car parts before splashing any cash. These include:

9. Used car finance options

Once you are satisfied that the second-hand car is in good condition, has all the right documentation and is coming from a legitimate seller, then you can determine how you are going to purchase it. If you do not want to make an outright purchase, there are several different finance options you can use to help fund the purchase of a used car. This helps spread the cost out over fixed monthly payments, and many finance providers also lend to people with no credit or poor credit.

The two most common finance options are Hire Purchase Agreements and Personal Contract Purchase, and many dealers will be open to offering these for both new and used vehicles. The terms are a little different for each, but you will have to pay an initial deposit and then a fixed set of monthly instalments with both types.

Motorbike Finance Explained

May 25, 2018MotorbikeMotorcycling is a long-term passion and many people seek to fulfil their thirst for adventure by purchasing their very own bike of their dreams. While typical motorcycles might not cost as much as a new car, the larger models could still set you back a fair amount, particularly when you add insurance, tax and other add-ons into the equation. However, many types of bikers can now benefit from motorbike finance, since there are several options available for a wide range of people, making it easier than ever to own a motorbike. Read below to understand some FAQs in relation to purchasing a bike on finance.

Who needs motorbike finance?

There is a big market in bike finance for young riders, who seek to purchase their very first motorbike instead of, or along with, a car. Normally, this will be a 50cc or 125cc bike, scooter or moped, which are all a good place to start for new riders. Young people often do not have the savings to outright buy their motorbike, so finance is a great option and allows them to spread out the cost of payments over a defined period. Finance allows the customer to purchase a bike with a comparatively low deposit, and in certain cases with no deposit at all.

Can I still get bike finance with a bad credit score?

It is understandable that not every person in the UK will have a perfect credit score, which is why we work with a wide range of lenders in order to match almost all types of people with a suitable finance deal. We have built close relationships with a range of lenders, all of which are able to offer different rates and terms depending on the motorcycle and the person applying for finance. This means that we search for the best possible deal for many different circumstances, whether an applicant has a superb credit score, bad credit score or none at all. At CarFinance Plus, we specialise in bad credit finance, meaning we accept most applicants with poor or fair credit. Our lenders will take into account your personal circumstances when deciding whether to grant you finance, rather than just looking at your credit rating. That being said, it is obviously better to have as good a credit score as possible, as it will mean you are given a more favourable rate than someone with a poor credit score since you will be deemed a less ‘risky’ applicant. In a nutshell, lenders are trying to protect themselves from the possibility of a borrower not making their necessary repayments.

What license restrictions apply?

There are regulations in place which determine the type of license someone must possess in order to ride certain types of powered vehicles, which fall into different categories. This means that restrictions will apply when seeking lender approval – if you are unsure, you can discuss this with us when making your initial application. It’s also important to point out that lenders will take note of any motoring convictions or points on your license when deciding whether to lend to you. Parking and speeding violations will not usually affect your application, but serious offences like driving without a license or drink-driving can certainly affect your position.

What is the minimum age?

All of our lenders will require you to be at least 18 years old before you can apply and qualify for bike finance, though many of these will have a higher age limit than 18 and some will have a maximum age limit too. Age restrictions vary between lenders, so it’s important to shop around and do your research when looking for a suitable finance contract.

What types of finance are available?

Bike finance works in a very similar way to car finance, namely because the different finance options are the same, including hire purchase agreements, PCP and personal loans. We briefly outline each type of finance below;

How much can I borrow?

The loan amount will depend upon both the lender and your personal circumstances. However, the minimum amount a person can borrow under motorbike finance is £1000, and the limit is £50,000.

What documents do I need?

Along with your license, you’ll need to supply a proof of address and proof of income, so that the lender can determine your ability to pay off the loan. You may need to supply other documents too but this will depend upon the lender in question and their individual requirements.

Top tips

When searching for bike finance, it’s always a good idea to shop around and do thorough research before committing to anything. Moreover, there are several trusted review sites out there, such as Trust Pilot, which will enable you to determine whether a lender is reputable – so be sure to do lots of digging! If you are worried about your credit rating and the likelihood of getting accepted, there are ways to check your rating online for free, whilst giving you an indication of what finance deals you’ll be able to acquire. Simply call us for more information and we’ll go through your options before helping to find your perfect bike finance deal.

How to Find the Best Car Finance Deals

May 10, 2018Car Finance DealsCar finance is a useful way to pay for a car in an affordable way. You can borrow money directly from a bank, finance company or credit union where you will agree to pay the amount back every month, plus a finance charge. This may be a better option for some people rather than buying a car outright. You will be able to get a car sooner, instead of having to save up over a long period of time. Deciding to buy a car with car finance can be pretty daunting, a lot of people don’t know where to start looking for car finance deals and are reluctant to try something, especially if they feel they might end up paying more than they would have to. If you feel overwhelmed when researching car finance, check out our top tips below on how to find the best car finance deals.

Seven top tips to find the best car finance deals

Push for a price discount before mentioning finance

If you can see that finance discount has been made by the finance company, then make sure you ask where the discount is for the car itself! Make sure you do this before you even say the word ‘finance’. If you can manage to swing a 10% discount, you have done a good job and can then move on to talk finance.

Make sure there’s a finance discount too

Once the deal on the car itself has been struck, move on to questioning the salesperson about the finance of the car or whether you need a deposit. You want to push for something that you know you can afford and won’t burn a hole in your pocket every month. Remember you have to live! Mention any relevant deposit contributions advertised on the manufacturer’s website.

Go for a car in stock for more haggling room

If you turn up to the showroom ready to haggle and fancy a car that is in stock, it might be worthwhile going for that car. You are more likely to be able to get a better deal from a car that is in stock as the salesperson will be more eager to get the deal all sorted that day before you can change your mind. If you are sure that you like the car and know that that is the best car for you, then haggle them down and go for it.

Ask for a service plan or free extras

If, after a lot of haggling, you realise that the dealer is unable or unwilling to drop the price of the car finance at all. Ask them if they will give you a service plan or throw in some extras. Many finance contracts make you service your car at a main dealer, which is normally more expensive than servicing somewhere else. This could, therefore, save you hundreds of pounds. If the manufacturer offers service packs, check the price beforehand, so you know how much you will be saving.

Shop around: talk to more than one dealership

You don’t have to be a deal finding Jedi to work out that the first place you look at is probably not the place with the best deals to offer. Car finance is the same as any other product, the more you look around and shop at other places, the more likely you are to find that little gem of a deal that is going to cause you to jump for joy. One way you can find the best car finance deals is looking out for a dealership that is having a summer/winter/spring/autumn sale that blows all its competitors out of the water for a week, you just have to dedicate the time to finding it.

Don’t be afraid to walk away

If you find a car that you really like but the car finance tips your budget by just a smidge and you know you can’t afford it, walk away. It may seem hard to say goodbye to the first deal you’ve really liked, but there will be other deals and other car finance options that are right for you. Don’t jump for the first thing that catches your eye as you may end up regretting it in the long run. If the dealer gets the feeling that you could leave at any moment, they are more likely to accommodate you and end up giving you the deal you need.

Leave enough time at the showroom

Salespeople know that most customers don’t leave enough time to find the deal that they need when going to a showroom. With other things to keep them busy such as work, kids, friends and sleep, they leave little time to squeeze in enough time to properly think about their car purchase. They, therefore, want to know as much as possible in as short a time as possible and are unlikely to get the best deal and risk choosing an unsuitable scheme. So there you have it, the top tips for making sure you get yourself the best car finance deal possible. You may think a lot of these points are just common sense, but it is surprising how often common sense is thrown out of the window when it comes to making big purchases such as cars and houses. Always make sure you know as much as you can before entering a showroom or a dealership and you have an idea about the type of car you are looking for that will be useful for you and your family.  

Everything you need to know about PCP Car Loans

April 20, 2018With several different car finance options available, choosing the right type of loan for you can often seem like a minefield. We’ve broken down all the key points on one of the most popular types of car loan, Personal Contract Purchase (PCP) so that you can make an informed decision as to whether this is the right type option for you.

What are PCP Car loans?

Similar to hire purchase agreements, PCP loans mean that the borrower will not own the vehicle until the end of the agreement. An initial deposit is made, usually around 10% of the car’s value, following by fixed monthly instalments as laid out in the agreement. Once the agreed contract term is over, the borrower may either choose to make a final outright payment to purchase the car (balloon payment) or can hand it back to the dealer and then take out another contract on a different car. Whether you decide to make a balloon payment or hand the vehicle back will depend on the predicted value of the car once your contract is over. If it’s not worth much at the end of the contract, you can pay another deposit and then swap it in for a newer model.

So, in a nutshell

It might seem a little complex but PCP car loans can be understood easily by breaking it down into three key parts:

What happens when the contract is over?

There are three options to choose from when your contract has come to an end. You can: Most people who have already completed a hassle-free loan term will go for the third option. Unfortunately, there isn’t an option to take the extra equity and keep it as cash. The only way to do this would be if you were to purchase the car and then go on to sell it privately.

How can I make repayments as low as possible?

There are ways to ensure your loan repayments are low. You can, of course, choose the cheapest car. But aside from that, the best option is to pay a large deposit or spread the repayments out for a longer period of time. Another way is to choose wisely and pick a car which can hold its depreciation value for longer. Additionally, setting a lower mileage limit (provided you can stick to it) will also mean lower repayments.

What if I want to end my contract early?

You have the option to settle the contract early, but this normally means you’ll have the pay off the difference between the current value of the car and the remaining balance owed – this is known as ‘negative equity’. For example, if the vehicle is worth £16,000 at the moment, but your settlement amount is £20,000, you will be required to pay the remaining £4,000. Such early repayment charges will be outlined in your contract and should be well-thought-out and discussed prior to the PCP agreement.

Who are they best for?

PCPs are one of the most flexible finance types, as there are several options at the end of the term, including the ability to buy the car. They are tailored to your individual financial situation, with suitable repayment terms made accordingly – even people with bad credit or customers with CCJ’s can be considered. They are also ideal for people who like to change their car every 2-3 years but still seek relatively low monthly payments to fit their personal budget. Essentially, PCPs allow people to quickly get behind the wheel of new or almost-new cars at a cheaper price than they might normally be able to afford. On the other hand, if you are someone who would rather keep the same vehicle but pay more each month, then perhaps you’re better off going for a hire purchase (HP) agreement or personal car loan, where the car is yours to keep once the payments have been made.
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