The United Kingdom is probably one of the highly developed countries in the world where the business sector is good along with the high-paying job opportunities and skyscrapers.
But isn’t it a little odd if you are working in a fast, one of the world’s greatest cities and yet you painstakingly find yourself commuting every time you go to work?
Well, then it is time for you to get yourself a car before you run out of good credit to do so.
That’s where the real concern sets in. It could take a lot of money to get you that nice car you urgently need or dreamt of. As we experience some financial difficulties, getting a car might seem to be out of reach.
This is the primary reason why car loans were brought up to help thousands of U.K. based citizens own a car even if they may be tightening their belts right now.
There are many types of car loans in U.K. that Englishmen will surely love.
There are even those that are called as fast loans where you can quickly apply for such a loan without the hassles of paperwork which makes the whole process a lot faster than any regular loans.
However, this type of loan is also unsecured as it does not require any of the usual stuff needed in getting a loan. It is also in this loan that rates are expected to be a bit higher. Fast car loans are usually like this.
Using Credit To Purchase A Car In The UK
A car is one of the most expensive items people buy during their lifetime. Paying with cash is the best approach but is not feasible for most people.
Most consumers finance their vehicles and they have several ways to do this. Before entering a dealership, understand each financing option and its pluses and minuses.
Personal contract leasing allows people to drive a new car without the cost involved in a purchase. A lower deposit and monthly payments entitle a driver to lease the vehicle.
Monthly payments are fixed and based on the depreciated value at the expiration of the lease contract. This allows people to drive a more high-end vehicle than they could afford to purchase.
Drivers cannot purchase the car at the end of the personal contract leasing period but they can with personal contract purchase pcp.
A deposit and monthly payments including interest are required during a several-year contract period. To keep the car, the driver makes a payment equal to the minimum guaranteed future value.
This amount may alternatively be applied as a deposit on a new personal contract purchase pcp plan. Or, the vehicle may be returned, as with a lease.
Buying the auto when the contract ends may cost more than under a hire purchase arrangement, the simplest type of car finance.
This arrangement requires a deposit of approximately ten percent and monthly payments representing the remainder of the price plus interest. With personal contract and hire purchase, ownership is not conveyed until the final payment is made.
An unsecured personal loan is another option and interest rates are as low as 6.4 percent. This allows drivers to own the car from the beginning because they pay the dealer in cash.
No matter which type of financing car buyers lean toward, they should compare fees and interest rates before making a final decision.
The real costs of financing and running either an old or a new car
The complete financial outlay for running an “typical” new car in the United Kingdom is around £5,869, conversely running an “average” used car costs only £4,441.
It’s hardly surprising that, used car owners save more money on finance costings, however they pay more in maintenance. In addition to this fact people that own used cars also burn more cash on fuel; this can be explained in part to a noticeable gain in the fuel efficiency of newer model cars.
The Car Loan Application Process
If you are thinking of applying for a car loan in the U.K., it is important to bear in mind all the necessary details about rates, terms and conditions, and penalties in case of non repayment of the loan amount.
This is vital to avoid any future troubles as it can greatly affect on your credit score.
For you to be eligible for an car loan in the U.K., you need to have a citizenship in the U.K. and at least 18 years old. You also need to have a proof of your employment stating your fixed monthly salary.
With so many loan lenders in the country, requirement for the fixed monthly salary of the borrower may vary.
There are also a lot of loan lenders that have their own website set up in order to reach more clients nationwide and even worldwide.
It is through the internet that a borrower is able to apply for a quick, easy, and hassle free loan in just a few minutes. It’s a no-brainer task for anyone.
With the use of your computer and the internet, you can choose from many car loan companies in the U.K. and it won’t be that hard to find one that suits you.
In this strategy you will be able to find a loan lender that offers low and better rates compared to those offered by lenders in the actual market.
Brokers are also within your reach that you can relay for some hidden terms and conditions which may turn out to be beneficial for you.
Factors that affect credit ratings (See above)
Credit scores are basically made up of 5 sections. Points are usually awarded for each individual section, and a higher score is of course more coveted.
The sections are described below in order of how important they are:
1. Repayment Efficiency – 35% Importance Ratio
Paying off your financial liabilities quickly and fully has the most significance on your credit scoring. Sluggish/late repayments, court judgments and charge-backs will nearly always have an undesirable effect. Issues that have happened in the last couple of years carry more of a burden when compared with older issues.
2. Unpaid Credit Card Account balances – 30% Importance Ratio
This factor indicates the realistic ratio existing between the unpaid balance and available credit. If at all feasible, you should attempt to make a real effort to keep account balances as near to zero as you can, or at least under 30% of the obtainable credit floor for a minimum of 2-3 months before trying to purchase a home or other high value commodity such as a car.
3. Your Own Credit History – 15% Importance Ratio
This part of the credit score stresses the amount of time since a certain credit source was initiated. An experienced borrower in many cases will be superior in this department.
4. Varieties Of Credit Being Used – 10% Importance Ratio
A mixture of car finance, credit cards and maybe even mortgages can be better than a over abundance of finance debt stemming from just credit cards on their own. If at all possible you should attempt to have 1-2 open well known credit card accounts live at any one time.
5. Credit File Queries – 10% Importance Ratio
This part of your credit score adds up the quota of searches created on a person’s credit history during a twelve-month time period. Individual searches can take between 2 to 25 scoring points on a credit rating; based upon the number of points an individual has remaining.
It is worth remembering that if you access your own credit report, it won’t have any bearing your own personal rating.
Finally, you shouldn’t forget that a credit score report is a produced and calculated by a computer.
It is simply an indication of today’s credit report user profile for any given person, and it can certainly change in a time frame as short as one week.
Being Smart When Buying A Car And More
What we purchase in life is important but so is how we buy it. Purchasing something in the wrong way can cost us dearly. This is especially true when it comes to an automobile. Cars are expensive enough without us adding to the cost by being unwise buyers. Here are several ways to be smart when purchasing a car…and more.
Car buyers should not immediately take the car finance package offered by a dealer. Shopping around and comparing car loans to other methods of payment is recommended. According to Sainsbury’s Finance loans business manager David Walker, many car buyers spend more time selecting a vehicle and securing a good price than they do looking for car finance.
Mr. Walker advises that car buyers shop around and negotiate the price of the car separate from car financing. In some cases, leasing, taking out a personal loan, or borrowing against home equity could be less expensive than even the cheapest car loans. Car buyers should take the financing process as seriously as they do choosing their car.
When the car insurance policy nears expiration, drivers should not automatically renew coverage with their current insurer. According to Gareth Kloet with Confused, a comparison Web site, insurers do not reward loyalty. He revealed that over 50 percent of drivers save more than £200 by switching car insurance companies. Savings can also be found by switching home insurers, to the tune of £100 on average.
There are other ways for people to be smart shoppers. With APRs of close to 30 percent, a store credit card can be an expensive way to shop. The average APR for a typical credit card is only 18.5 percent. If a special percentage off deal is offered for the first use, take advantage of it and pay off the balance before the high APR hits.
Consider Resale Value Before Financing A Car
Before signing on the dotted line for a car loan, drivers should make sure their purchase is a smart one. The residual value of the vehicle is important because it determines the amount of a subsequent car loan.
The driving authority Glass has published its latest residual value list for automobiles and it features some surprising data that all drivers should know.
The Toyota Landcruiser had the best residual value after three years of ownership, averaging 72.2 percent. Just slightly behind it, retaining 71.6 percent of its value, was the two-liter, two-wheel drive TDCi Titanium Ford Kuga.
Edging into the number three spot was the Audi Q5, which had a residual value of 71.2 percent after three years. Any of these three cars would be a smart bet for UK drivers using car finance.
An interesting note is that seven of the cars in the top ten featured a diesel engine. In what might seem surprising to many people, off-road or lifestyle 4x4s occupied six of the top seven spots. The Fiat 500 and Volkswagen Golf were the only two cars on the list that were considered mass-market vehicles. Both of these cars feature great fuel economy and a range of options.
The complete Glass list featured over 7,700 models and trim lines, each vehicle having approximately 37,000 miles after three years of use. Adrian Rushmore, Glass managing editor, reported that the 2011 residual value list highlights a very diverse used car market. He also noted that the list seems to be constantly changing.
Drivers are purchasing vehicles based on both practical issues like weather conditions or fuel economy and emotionally-based lifestyle goals, said Mr. Rushmore. He noted that drivers are gravitating toward vehicles that are more affordable.
However, this increased demand has not outpaced supply within this market segment, leaving everyone happy.
Inexpensive Car Loans For Drivers With Bad Credit
For many of us, vehicle ownership is a necessity, not a status symbol. We need cars to get to and from work and school but many of us cannot afford these automobiles. Car finance is required in order for us to put ourselves behind the wheel. Not all car loans are expensive, even for those of us with credit that is less than perfect.
Having a substandard credit score usually puts traditional car loans off limits. Though High Street banks will not provide the money, other lenders specialize in bad credit car finance. The loans they offer are usually secured, requiring that the car be placed as collateral. Vehicle value and repayment capability of the borrower determine the amount of the loan.
In some cases, bad credit car finance is provided only for a short term. A higher interest rate is usually charged due to the emergency need and poor credit status of the borrower. Drivers should compare loan quotes from several bad credit lenders to find the best deal. Some lenders provide an online application and do not require supporting documentation. An individual can receive the requested funds within 24 hours via a transfer to the bank account.
The short term nature of these loans should not be ignored. If the borrower does not repay the loan within the outlined timeframe, penalties and additional interest may accrue. This may cause the financing to become much more expensive than the borrower anticipated and in some cases, the loan may be unaffordable.
People looking for car loans designed for bad credit borrowers should comparison-shop before signing on the dotted line. Entering a lending agreement before reading the fine print could be a mistake. To make the car purchase a smart move, borrowers should be aware of the loan terms and ensure that the financing is affordable.
Affordability Main Factor In Car Buying Process
BMW Financial Services released new research revealing that affordability is the top consideration during the vehicle purchase process. Of the Brits responding to the survey, 93 percent listed this as the number one factor. The overall impact of buying an affordable car is often limited, however, because some buyers make hasty car finance decisions.
Twenty-two percent of drivers decide on car financing within only two hours. Compare this to the one month or more that just under half of Brits take to select a car. Over half of car buyers make the financing decision themselves without consulting a partner. However, they also do this when making other big ticket purchases like holidays or new kitchens.
The popularity of car loans and other types of financing is increasing. Four in every ten British motorists consider financing as “perfectly acceptable.” One-third claim to be happy with rent-to-own and other available programs. BMW Financial Services GM of Sales and Marketing Joe Pattinson stated that buyers are realizing that outright ownership of a depreciating asset does not make good financial sense.
Using finance to make a car purchase provides certain products with protected residual value, stated Mr. Pattinson. This value often exceeds the value the car holds when the payment plan ends. The difference can become a deposit for a new car. Consumers who have found themselves on the receiving end of rising prices are doing what they can to fight back.
BMW unveiled its 50:50 car finance program in July. The X5, X6, M3, and 6 and 7 Series models are eligible for the package, which requires payment of 50 percent of the car value up front, nothing for two years, and then payment of the remaining 50 percent, part exchange, or return of the vehicle. This is an affordable and flexible way for many Brits to own a BMW.
Many people are turning to sub-prime car finance options
According to major bad credit car finance organization The Funding Corporation, more of its customers are individuals who realize that their mainstream credit applications will likely be rejected. In the current economy, even the most minor credit blemishes are being scrutinized. A couple of missed credit card payments may result in applications for car loans being declined.
Fearing this rejection, many professionals are turning to sub-prime car finance. The Funding Corporation wants consumers to know that the list of people with higher salaries and lower credit ratings is long. Customers it has recently assisted include a commercial pilot, a university professor, and a general practitioner. According to the organization, younger professionals represent a larger portion of loan applicants rejected by other lenders.
These individuals and others realize that having their credit applications rejected can do further damage to their credit score. Therefore, they are choosing not to pursue high street lenders, said head of motor operations Richard Cox. By receiving car loans from a company like The Funding Corporation, consumers are able to immediately begin repairing their credit rather than damaging it with an unsuccessful credit inquiry.
Mr. Cox stated that his company takes a different approach when assessing young professionals considered a bad risk by other lenders. Reasons for past credit issues, likelihood that issues with recur, and applicant ability to service the loan are all taken into consideration. The company often finds that a chronic repayment issue does not exist.
Since negative information may remain on a credit file for as long as six years, these borrowers often feel “haunted” by it. In the intervening time, they may have become much better at managing their money. Mr. Cox said that they are not alone in the situation because bad credit car finance companies like The Funding Corporation can serve as a bridge to mainstream borrowing.
Non Prime Finance Drivers Receive Some Assistance
More UK consumers are finding themselves victims of the recent financial crisis. Some who are planning to buy a car are rejected by banks. Leading UK car financing company moneybarn recently released an alternative. Its car finance product features the flexibility, affordability, and service that prime customers expect, with a target audience of non-prime UK car buyers.
As more British car buyers are falling into the non prime category, dealer forecourt and high street lenders refuse financing. This leads them to bad credit car finance and companies like moneybarn, which was formerly called Duncton plc. For almost two decades, this company has provided financing to car buyers with “non confirming” situations.
Using a unique process of decision making, moneybarn is now able to lend to individuals turned away by prime lenders. Where other lenders consider only the credit score of the applicant, moneybarn also looks at the vehicle trade-in value, customer debt level, address and income stability, and car finance affordability. This more inclusive approach allows consumers with less than excellent credit scores to qualify for car finance based on other factors.
According to credit information source Equifax, one in every three people completing a credit card application within the past 12 months was denied due to a poor credit rating. Credit Action reports that in 2011 alone, over 100,000 UK residents will declare bankruptcy or insolvency and more than 500,000 County Court Judgments will be issued. Consumers in these situations will have a difficult time obtaining car loans.
Transportation is necessary for many UK families and when banks turn them away, lenders like moneybarn are there to help. Car buyers can select a vehicle from any dealer and receive competitive bad credit car finance rates. This is preferred to dealing with questionable lenders or paying extremely high interest rates.
Fewer UK Residents Plan To Purchase Vehicles
A survey conducted by Sainsbury’s Finance revealed that fewer people in the UK plan to purchase a new or used automobile in the near future. Approximately 5.56 million plan to change cars within the next six months, a 22 percent decline from March through August 2011. Twenty-eight percent fewer people plan a purchase between September 2011 and February 2012 than did between September 2010 and February 2011.
UK residents who do plan to buy a car during the next six months plan to spend about £40.2 billion. This is much less than the £51.3 billion spent between March and August 2011. This marks the first period since September 2009 that this survey has reflected a reduction in anticipated spending on automobiles.
Most motorists planning to purchase a car hail from the South East and they also plan to spend the most money, £8.2 billion in total. While 13 percent of South East residents intend to buy an auto within the next six months, only six percent of car owners in Scotland plan a car change during this period. North Eastern car owners plan to spend the least, a total of £1.2 billion.
Steven Baillie, head of loans with Sainsbury’s Finance, said the decline reported by the survey shows the impact of the current economy on auto purchasing. The significant drop in number of people intending to purchase a vehicle in the next six months has an upside. Car buyers have an opportunity to negotiate a great deal.
Securing a good deal will lower car finance costs when a loan with a good interest rate is found. It seems the auto industry will continue to struggle but those in the market for a car will have increased bargaining power. Even bad credit auto finance may be characterized by a low purchase price and lower than usual interest rate.
Be Wary When Purchasing A Used Van Check Out The Finance History
One of the latest UK vehicle scams relates to stolen vans. Light commercial vehicles like vans are primary targets of car thieves. The criminals steal the vans, which are eventually resold to unsuspecting consumers. Anyone in the market for used van should investigate the car finance history and ensure that the vehicle is fit for purpose.
The number one vehicle on the hit list for auto thieves is the Ford Transit. It is also most likely to be resold, despite its possible colorful past, reported vehicle information agency HPI. It is believed that one in every 16 vans has been involved in a car accident and subsequently written off by an insurance company. However, fraudsters are selling these vans to consumers, even autos that should have been scrapped.
Another aspect that van buyers should be aware of is outstanding car finance. One in seven vans that HPI checks is still on a regular or bad credit car finance agreement. It is likely that as many as one in eight vans had a number plate change. Consumers should run a vehicle check with a service like HPI prior to entering an agreement to purchase the automobile.
Yet more issues plague used vans on the market. Clocked vans feature altered odometers in an attempt to charge a higher selling price. Details of similar but legitimate vans are copied to less reputable vehicles, creating clones. Consumers often do not realize they purchased a clone until after they have paid for it.
Nicola Johnson from HPI stated that purchasing a van with outstanding finance or one that has been stolen might result in loss of the vehicle and the money paid for it. An HPI check reveals the history of the vehicle and identifies issues that deserve further investigation. Consumers should use this and other tools to discover potential problems.
The Real Cost Of Your Car
Sainsbury’s car insurance recently revealed that motoring costs now top £3,000 per year. This figure was high enough to convince 1.3 million UK motorists to give up driving during the past year.
Those who are still on the road should make sure they are getting the most value for their money. Knowing what comprises the annual operation costs for a vehicle helps drivers to minimize them.
Car insurance is a major vehicle expense and comparison-shopping allows drivers to get the best deal. Identical policies should be compared between carriers so drivers get the most comprehensive coverage at the lowest price.
Before purchasing a car, consumers should research its insurance category. When purchasing coverage, they should determine the amount of excess they can afford to pay should they have an accident.
Fuel costs have risen more than £320 per year for the typical motorist, according to Sainsbury’s Finance. Drivers should shop around for the lowest-priced fuel in the local area. If they drive slower, smarter, and smoother, they can reduce fuel consumption. For example, driving 50 mph consumes 20 to 30 percent less fuel than driving 70 mph.
Car finance may have become less expensive during the past year but the price of MOT, the annual Ministry of Transport test for auto safety, has remained about the same. Booking MOT and vehicle servicing together may entitle drivers to a discount.
Reviewing the MOT checklist ahead of time prevents failing for a reason that could have been easily fixed by the driver.
When reviewing car loans for new cars, consider road tax. The more eco-friendly the vehicle, the lower the tax. Remember, even if the car is not subject to road tax, the tax disc must be renewed every year and displayed on the vehicle.
A Statutory Off Road Notification should be completed for any vehicle that is not being driven.
Cash-Restricted UK Families Selling Second Vehicle
Vehicle ownership costs are skyrocketing, forcing UK households to take drastic measures. Within the past 12 months, car insurance costs increased up to 40 percent, prompting an investigation by the Office of Fair Trading(OFT). While the OFT investigates whether premium collusion took place, fuel prices are steadily climbing. Some UK motorists who cannot catch a break are changing their driving habits.
A recent survey by YouGov revealed that families in southeast England are taking fewer road trips for leisure purposes. More than half of the survey respondents reported that they are spending weekends at home rather than driving to local attractions. This change in lifestyle is sure to affect the revenues of local theme parks, museums, and other recreation spots.
Of the respondents who had two family vehicles, 13 percent sold the second car to save on auto insurance and fuel. They will use the extra cash to pay for car loans and repairs on the primary car. The survey, which included 2,000 individuals throughout the UK, also revealed that one-quarter of parents plan to car share during the school year to reduce driving expenses.
Motors.co.uk Commercial Director Phil Jones pointed to these latest figures as “concrete evidence” of sacrifices vehicle owners must make to deal with rising auto-related costs and restricted incomes. He stated that things families previously “took for granted” like family day trips and leisure activities are now being viewed as “luxuries.” Things are even worse for drivers with bad credit car finance because they pay higher interest rates.
Before purchasing a second car for the family, UK consumers will be doing some serious number-crunching. If the figures do not work out in their favor, they may be piling into one car for their family vacations, which will be few and far between. This is the new reality, based on the current economy.
UK Car finance related videos
Radio 4 Moneybox interview of author Graham Hill about the only guide to car finance available in the UK and how to best finance your next car. The interview shows how a personal loan is not better than HP and how a personal lease can save consumers …