So is your head swimming with all the jargon surrounding car finance? 😩 When it comes to setting up financing for your next vehicle, you're sure to run across several terms you've never heard before. As car manufacturers add more features and gadgets to their vehicles, spec panels and options lists are increasingly getting cluttered with seemingly meaningless characters and numbers. But if that's not enough to blow your mind, before you drive that dream car home, you first have to understand about how to finance your car. And this will end up with your needing to sign a financial agreement with the lender, and sign the dotted line. Scary! But it doesn't have to be - and of course, before you do, here at Carmoola, we would like you to have a good grasp of everything concerning your finance agreement ,so you know what you’re agreeing to.
What is a Car Finance Agreement?
This is a legal document or contract that you will receive from your lender setting out all the terms and conditions surrounding your loan. These agreements can be very long and all in small print, confusing and a really annoying part of the process. But the great news is that things are changing and finance with Carmoola is very open, transparent and easy to understand. Yes there will be some paragraphs to read and understand, but nothing like the pages of tiny print you used to receive.
Of course it's really important you fully understand what you're signing and that and that applies to every legal document you sign - so please do read it carefully! It should cover everything that you need to know, for example if you cannot afford the repayments or what your cancellation rights are.
Common Questions About Car Finance Agreement
The car finance agreement is your contract with the lender regarding your loan. In it, you’ll find all the details of your loan such as the total amount repayable, interest rate, APR, other fees, and your monthly repayment amount which you need to take care of at a specific date each month for the whole duration of your finance agreement.
These are just some of the few details that are included in your loan contract. It’s typically a lengthy document where you can find answers to your questions. Sometimes though, they’re written in a way that’s not easily understandable so that’s where we’ll come in to help you out!
Can I Cancel a Car Finance Agreement?
If you've signed a car finance contract, there are several instances in which you may change your mind and would like to cancel it. You may have heard the term "cooling off period". It is a period of 14 days where you’re allowed to cancel your car finance agreement and you won’t have to face any penalties. Beyond the cooling off period, if you’ve paid half of what you owe, you can cancel your car loan.
You also have the option to pay off half of your total loan and surrender the vehicle if you wish to cancel your loan contract earlier. This might be a good way to get out of a contract if you don't need the vehicle anymore, can't afford the payments, need to minimise your monthly spending, or find a better bargain elsewhere. If this is the route you’re going to take, make sure you get in touch with the lender so you’ll know their process when it comes to withdrawing from a car finance agreement.
If you choose this method of withdrawal, be sure the vehicle you're returning is in good working condition and without damage beyond the usual wear and tear. If the vehicle has suffered some damage, you would have to pay for any repairs that are required to bring it up to a desirable state where it can be sold at a good price. To minimise any surprise expenditures, it's wise to take the car to an authorised garage yourself before returning it to the lender.
How Can I Get Out of a Car Finance Agreement?
Depending on how much you've paid to date, there are two methods to cancel your vehicle finance deal early: voluntary cancellation or early settlement. You can opt to voluntarily terminate if you've paid 50% or more of the total amount repayable. If not, you have the option of settling early and keeping the car.
After 50% of the entire sum due has been paid, you may cancel your contract. This is known as a voluntary termination, and it is a legal privilege protected under Section 99 of the Consumer Credit Act of 1974. The following are the most crucial things to know regarding voluntary termination:
- If you have some issues keeping up with your monthly payments, voluntary termination can be a viable alternative for you.
- Before you can terminate your contract, you must have paid 50% or more of the total amount owed or the total amount payable, along with any interest and fees.
- You will not receive a refund if you have paid more than 50% and voluntarily quit.
- Finance businesses generally require written notification of your voluntary termination.
- You must either return the car or ask to have it picked up. There will usually be a charge for this.
- You will be responsible for repairs once you have damaged the vehicle outside the fair wear and tear criteria.
- You will be charged an excess mileage fee if you exceed your mileage agreement.
Even if you haven't paid half of the total cost of the loan, you can always get out of the car loan by paying it off early.
- If you are able to pay off the entire outstanding sum, or if the vehicle's trade-in value is more than the settlement figure, you should settle early.
- It could happen at any point during your contract.
- You will pay the remaining balance, any administrative costs, and the final balloon payment that was agreed upon at the start of your contract if you have a PCP. But, you will not be required to pay any interest in the future.
- Once you've paid the settlement amount, you'll be the owner of the vehicle.
Can You Change the Name on a Car Finance Agreement?
The short answer is no, you can't simply swap names on a car finance deal, unfortunately. Each loan is customised to the borrower's specific needs and financial situation, and the money has been lent on the basis of an individual's credit profile, and because everyone's needs and financial status are different, they can't be simply transferred.
Can I Have Two Car Finance Agreements?
Is it possible to have two auto financing agreements? If your family's needs require more than one car and you can't afford to buy one outright, you may enquire if you can get two car finance agreements. Having two or more finance agreements is entirely possible as long as you can demonstrate that you can afford them.
Today’s families often need multiple vehicles. Having a second car allows you more mobility for school and work runs, but getting financing for a second car, while attainable, might be more difficult. But as long as you can afford to pay the monthly payments, then this wouldn’t be an issue.
Improve Your Chances of Getting Car Finance
You may improve your chances of getting a second car finance deal by putting down a substantial amount for a deposit before you submit your application. This lowers your monthly payments, enhances your affordability and makes you more appealing to lenders. Be sure not to apply for car finance from multiple lenders because when they conduct a hard credit search on your credit report, it will be recorded on your history and it wouldn’t look good. If you are unsure about the likelihood of being accepted, it might be wise to check your own credit score before you start applying.
If your credit score is low, it would be wise to improve it first. Pay off any existing financial obligations in full if you can, or arrange payment plans to cover any missed payments. Set up automatic payments for your monthly household bills to ensure that you never miss a payment. This way, you’ll be able to demonstrate your ability to manage your finances.
But our last word of advice on this is to always check and read the small print, then you can be fully informed of your rights and obligations when you take on a car finance agreement - good luck! 🍀