How Do I Compare Car Finance Companies?

With so many options for choosing a car finance company in the UK, many car buyers end up even more confused once they've started researching. So before you compare car finance with lenders, it's worth doing a spot of comparison analysis to determine which deals are best suited for your situation. Don't worry – it's not as complicated as it sounds, and this guide has everything you need to know about comparing car finance companies. 

What Should I Consider When I Compare Car Finance Companies?

Good question! There's a fair amount of information to consider when comparing car finance companies, so we've broken it down into simple steps that you can do one at a time. That way, there's no need to feel overwhelmed and you can find the right car finance company for your needs.  

Do Your Research

Car finance borrowing continues to grow, so it's important to understand the pros and cons of choosing the right lender and to also know whether car finance is right for you. Take all the time you need to do thorough research to compare car finance company deals being offered. If you don't feel confident or simply don't have the time, it might be worth using a broker who can point you in the direction of a lender that will cater for your particular circumstances. 

Take your time

Don’t feel pressured to choose the first car finance company that you encounter. There's no need to rush the decision. When deciding, you should weigh up the advantages and disadvantages of each offer so that you can get the best car finance deal. For instance, which company offers the lowest interest rates, who has better contract terms, and is there repayment flexibility? Plus, what type of credit checks do they undertake?

Understand Credit Checks

Talking of credit checks, there's no need to panic about this particular process of car financing. Your credit will be checked, and the overall credit score might drop a few points if you're accepted and proceed with the offer. But if you're generally good with finances, you can earn those points back pretty swiftly. The problem is when you make multiple applications for finance at one. Lenders will see several hard checks on your report and think that you're in desperate need for finance and therefore unable to manage your money. So make sure you only make one finance application at a time.

Keep Your Expectations Realistic

Knowing your credit score and history helps manage your expectations regarding a potential car finance deal or even being approved for one. A low credit score could make it difficult to secure favourable terms. While some financing firms may approve your application for car finance, you could receive a high-interest rate. To improve your chances of getting better terms, it might be beneficial to improve your credit score before applying for car finance.

Alternatively, you can compare car finance deals for specialist lenders, although this will also likely result in higher interest rates. 

Have a good understanding of your financial situation and be realistic about your capacity to pay the monthly instalments before buying a car. The first question any car buyer should ask is “can I really afford this new car?” By answering the question honestly, you'll be able to determine what car is within your budget. 

Scrutinise the Contract

Consider the specifics of a car finance deal, such as the overall cost, monthly repayment amount and interest rates. Analyse the figures meticulously before agreeing to any contract, and don't rush into making a decision. Remember our earlier point – there's no urgency to agree immediately, so take your time.

How Do I Compare Car Finance Companies?

The best way to compare different financing companies is to look at their interest rate, the length of the contract term and whether they offer flexible payments. Car finance companies differ in many ways, so look closely into the details of the deals being offered so that you can see which options allow you to save the most money. Here's a handy tip: look at the "total amount repayable by customer" for each lender for a good method of comparison.

It’s also worth looking at comparison websites and lining all the offers up against each other to see which one is best. Just remember to look at the overall cost of borrowing and not only the interest rate. 

Look for Convenience

Choosing a car finance deal with the lowest interest rate is the practical move, but it's also worth considering the convenience of the process. For instance, you may want to check if the car finance company requires you to submit your documents in person or via post, or if you can submit them online through their mobile application or website. The convenience factor should also be taken into account when choosing the best car finance company.

Contract Term Length

The duration of the contract term is another crucial factor to consider. Are you able to obtain car finance for two years, or is a seven-year deal possible? While it ultimately depends on your financial circumstances and personal preference, you'll want to work with a car finance company that can cater to your requirements.

Suppose you're seeking a seven-year contract to reduce your monthly repayments. In that case, it would be beneficial if the car finance company can provide you with a favourable deal and a reasonable interest rate that fits your budget.

Use Car Finance Calculators

Another thing that you can use when comparing car finance companies is a car finance calculator. You can adjust the different factors in the calculator, such as the contract term length and budget. You will then be able to see how much you need to prepare every month for the repayment.

Many car finance companies have calculators on their websites. Be sure to make use of them and take note of the results. This way, you can easily see which ones offer good deals that will allow you to stick with your budget.

You have to remember though that the results of the car finance calculators are only to serve as estimates and are not the actual amount that you will be paying once you've signed the contract.

Getting the Right Car Finance Deal

Buying a car is an exciting time. While there are many aspects to consider, remember to take your time. Such a purchase is among the biggest decisions you’ll make. Do your research, study the numbers, and ask for advice. But don't get too worried or too anxious that you forget to enjoy the moment when you finally drive your new car home. Keep in mind to take as much time as you need when choosing the best car finance company in the UK. The more you get to know about the deals, the better it is for you and your finances.

And of course, don't forget to check out Carmoola. We help you cruise through car finance with competitive rates. Get your budget in minutes and see if we've got the right deal that'll get you behind the wheel of your dream car.