What is The Meaning of Car Finance?
What is the meaning of car finance really? For many buyers, it’s a tough decision to make, to finance or not to finance? With so many options and considerations involved in buying or leasing your next vehicle - such as how much you can afford monthly, what type of car will best suit the needs of your family, whether to buy new/used etc., there's no wonder that people want some guidance before making this big purchase! Luckily we've got just over 5 minutes' worth of informative reading material below written by our incredibly knowledgeable team here at Carmoola who understand all too well about these numerous decisions buyers have to make.
Pros and Cons of Buying a Car with Cash
When everyone is going about their daily lives, it can be hard to know what the best option for buying a car would actually look like. With loans and payments comes monthly fees which may seem overwhelming at first glance; not only that but some people just don't have enough money available in order make such an expense possible without taking on additional debt from elsewhere - especially if they're already struggling financially! But then there are always cash-buyers who say "no" when faced with all these problems because ultimately no one wants more responsibility than necessary (and let’s face reality: cars aren’t needed by everyone).
- You make a one-time payment and the car is yours to own.
- The car is immediately under your ownership.
- It’s cheaper compared to getting car finance or a loan.
- You don’t have to worry about mileage limits.
- Since the car is yours, you have the option to sell it whenever you want.
- It’s the simplest and most straightforward way to buy a car.
- The car is an item that depreciates in value over time.
- You may have to use all or a big chunk of your savings to buy it.
- You may leave yourself with little or no reserve for emergencies
- The choices you have are limited by the budget you have.
What Does Car Finance Mean?
Some of the most popular options for getting a car on finance are credit cards, personal loans, HP and PCP, or leases. Each option has its pros and cons depending upon your needs as well as those who'll be driving!
So, you want to get a car on finance and spread the cost over a period of time?
This is an easy choice if your monthly income/budget allows it, especially with the Carmoola app being so fast, simple and straightforward to use. But before making any decisions regarding which option will work best for YOU - let's take a look at the benefits and drawbacks associated with each type of financing.
The pros (and cons) of buying a car on finance vary, depending upon what kind of vehicles are being purchased; however, there can be some common features such as interest rates or repayment terms that apply across all four alternative choices.
- You can choose a better car since you’ll have the money to buy the model you like.
- Payment is spread out through monthly repayments.
- The amount you pay every month is usually fixed.
- Even if you have a tight budget, you can get a better car.
- Getting (and repaying) car finance actually improves your credit score.
- You need to pay interest on top of the principal amount.
- There are limitations on what you can change on the car.
- Since it’s a long-term agreement, you may find it hard to get out of it.
- There might be mileage fees if you exceed the limit.
- If there is any damage to the car, you may have to pay additional fees.
- If you fail to make monthly payments, it can affect your credit score negatively.
Benefits of Getting Car Finance
Now that you have an idea of the meaning of car finance, and its pros and ocns, let’s look specifically at its many benefits. Keep in mind that the most basic car finance meaning is buying a car, and then paying for it through fixed monthly payments. As mentioned, there are different types of car financing agreements.
You can get a car lease, which is like a long-term car rental. A personal contract purchase agreement or PCP gives you the option to buy the car at the end of the contract or you can return it. And hire purchase or HP is when you pay a deposit and monthly payments, and then when you’ve fulfilled your obligations, the car is yours. You can also get a personal loan or specialist car loan with no deposit to pay. Here are the benefits of getting car finance.
Payments are Usually Fixed
With car finance, you are usually going to pay a fixed amount every month for a set number of years. There are also some variable rate interest deals, but please look carefully into the value of these as the monthly payments will go up and down, depending on the Bank of England base rate, so you could get a nasty surprise! With a fixed-interest finance deal, you can budget for it and work out your monthly finances to ensure that you can make the payments on time. You don’t have to worry about any surprise fees because everything is clear and included in the car finance agreement. But be sure to read and understand it to know what admin fees etc you are paying.
There are Zero Deposit Deals
What is the meaning of 0% car finance APR? Today, it’s possible to get a new car without having to pay anything, thanks to zero-deposit deals. However, be ready to pay higher monthly payments compared to making a deposit. Nonetheless, if the amount fits your financial situation, it’s nothing to worry about. A zero-deposit deal is a very attractive option you can consider.
Car Finance is Easier to Get than Bank Loan
How’s your credit score? If it’s not that great, you may find it difficult to get approved for an unsecured bank loan. However, you can still try getting specialist car financing. Financing companies are not as strict compared to banks when it comes to assessing credit scores, as your car is secured against the loan - if you can't keep up the repayments your car may be repossessed. So, if your credit score is not that good, don’t worry because you may still be eligible for car finance.
Improves Your Credit Score
Speaking of credit scores, if you want to improve yours, getting car finance can help. But make sure that you commit to making payments on time every month for the whole period of the term. Build your credit rating so that you can show future lenders that you’re able to pay back your loans. Keep a good record so that in the future, you’ll have a bigger chance of getting accepted by more lenders and the monthly payments could also be lower.
Get Car Finance with Carmoola
The meaning of car finance is not that complicated. With Carmoola, we make everything simple so you can secure your dream car. You can check if you can get car finance with us by downloading Carmoola. You only need to enter certain details about yourself, to verify your identity, and check the results! It’s really that easy and just takes a few minutes and you get a result in 60 seconds. Gone are the days when buying a car on finance was so intimidating and frustrating.
Got any questions for us? Contact us today! Our friendly and knowledgeable team will be happy to talk to you! 😃 Or we have blogs and videos covering every aspect of buying a car on finance. Happy researching!