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Low Interest Car Finance Companies

How do you get car finance with low interest? When you’re choosing a car finance deal, it’s important that you check the interest rates of each lender you’re considering. If you choose the right car finance company with the lowest rate, you can save more money in the long run. So, before you sign a car finance agreement, be sure to read through this article first so that you’ll know how to find the best car finance deals. 

Types of Car Finance Arrangements

There are three main types of car finance arrangements. The first one is called Hire Purchase. With this deal, you will be paying a fixed amount every month. By the end of your contract and when you’ve paid everything off, the car is now yours. 

The next kind of arrangement is called the Personal Contract Purchase. It works the same way as the Hire Purchase deal because you’ll be paying the lender every month. The amount will be much lower compared to that of Hire Purchase payments though. By the time your contract ends, you have the option to buy the car by paying a balloon payment or you may return the vehicle. 

For the last type of car finance deal, there’s Car Leasing. With this, you’re renting a car long term. You will still pay the car finance company every month but when your contract is finished, you have to return the vehicle. Apart from the usual wear and tear, there shouldn’t be any damage to the car. Otherwise, you would have to pay for the repairs. 

How Car Finance Interest Works

Essentially, the rate of interest dictates how much you’re going to pay the lender on top of the actual cost of the car you want. When you get car finance, the monthly amount you’ll pay every month is determined by the price of the vehicle plus the interest that the lender asks. That’s why it’s crucial that you first look for the best car finance deals to find the lowest interest rates so that your monthly payments will be more affordable. 

With car finance, you’re borrowing a certain amount so you can push through with your car purchase. You may choose to borrow money for the full cost of the car or you may also pay a deposit upfront so you’ll be borrowing less money. The interest is added to the amount borrowed, and the total is then divided into the number of months of your car finance contract. That’s how you get your monthly repayment amount. 

The usual contract term length of car finance deals range from one year to seven years. But most car buyers choose from two years to five years. The usual case when it comes to borrowing money is that the higher the amount that you borrow, the better the interest rate. This is what’s called the APR or annual percentage rate. If you think you need to borrow more and can afford the repayments, make sure that you check the APRs of different car finance deals. 

Why Your Credit Score Matters

There are several factors that car finance companies consider when they’re assessing your application. One of the major factors is your credit score. If you have an excellent credit score, you will have a better chance of getting car finance with lower interest rates. It’s because lenders see you as low-risk. 

However, if your credit score is not that great, then you will be seen as high risk. Lenders may turn down your car finance application. Or if they do grant you financing, it might be at higher interest rates. If you think your credit score isn’t that good yet, you may choose to take some time to improve it before applying for car finance so you’ll get better deals. 

Getting the Best Finance Interest Rate

The first thing you need to do would be to research the different car finance deals available to you. Take note of the APRs and make sure you make use of the car finance calculators on the lenders’ websites. Once you have the numbers, make a list so you can easily compare the deals from various car finance companies. 

Apart from the APR, check the monthly repayment amount. You could be tempted to choose the arrangement with the lowest amount you have to pay every month. However, this is usually the case if your car finance contract runs for more than five years. If you calculate the total amount you’ll be paying, you’ll actually end up paying a lot more. So, be wise when choosing a contract term length and go for a shorter term.

Lastly, spend as much time as you need to look over the details of the deal before signing anything. Don’t be pressured if the representative of the car finance company is too aggressive. Simply get the quotes from the lenders and then take time to study them. Read through everything so that you don’t miss any important detail. And if there’s something you don’t understand, make it a point to ask the lender. 

Takeaway

If you want to save as much money as possible on your car finance repayments, see to it that you choose one that has the lowest interest rate. It may take some time to research and review all details of the different deals but it will be well worth it. 

Another thing to consider is buying a second-hand vehicle. It is more affordable than a brand new car but it will look and run just as well. You only have to do the necessary checks to make sure you’re getting a car that is in top condition. With a used car, you don’t have to borrow too much money. Your monthly payments will be much lower and you can pay back the lender much faster, too. 

Don’t forget to check the car finance calculators that are available on the lenders’ websites. Also, it may help you to read reviews of previous clients so that you’ll have a better idea of the quality of the lenders’ services. 

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