The popularity of car finance has consistently been on the rise over the past 10 years. In recent years, around 80 to 90% of new and used cars are bought with a finance agreement. Saying that, car finance can’t be guaranteed to everyone who applies as they may not be eligible but there’s still an alarming number of credit agreements being taken out on cars. But why are people relying on credit so heavily and why is car finance so popular? Let’s find out!
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Cars Are More Expensive.
The easiest way to buy a car is with cash and paying for it outright has its advantages. However, the cost of both new and used cars has risen massively over the past few years and drivers find themselves not being about to afford a cash payment. The cheapest new car in the car starts from around £14k in the UK and many drivers would need to get a finance deal in place to help spread the cost of ownership. Whilst used cars can be much cheaper, the cost has risen in recent years and what you would have paid for a car around 5 years ago could be much more to pay today.
You Can Spread The Cost.
One of the biggest reasons why drivers are choosing to finance a car is the ability to spread the cost. Car finance makes it easier to get a newer and better car than you would with cash and pay for it over several years. Car loans UK can be flexible and you can even tailor the loan to suit your monthly budget. Car finance can be used for both new and second-hand car purchases so there can be a huge amount of availability too.
More Options For Bad Credit.
We’re not saying having bad credit will make you eligible for finance but there are more options for those with a poor credit score than there used to be. Ideally, you should always improve your credit before trying to apply for any sort of finance or credit. More lenders have come to the market and are offering options for those with bad credit scores. Instead of focusing on your credit, they instead look at things like your affordability and income to ensure you’d be able to meet the repayments.
Multiple Ways To Finance.
Drivers are attracted to finance deals because there’s not just one type of finance on offer. In the UK, car finance can come in several forms. From Personal Loans to Hire Purchase deals, there is sure to be a deal which suits your situation. Personal Contract Purchase is one of the most popular ways to finance a car because of its attractive low monthly payments and flexibility to change cars more often. However, it’s not the best deal if you want to own the car because you’d have to pay a large balloon. Hire purchase can be good for those with bad credit because it’s a secured loan and if you fail to repay, the lender can take the car off you. It’s worth looking into each type of finance to see which is best.
Low Interest Rates.
When the Bank of England sets a lower interest rate than usual, it means lenders can offer you a low-rate car finance deal. Interest rates are changing all the time so locking in a low interest when they drop can help drivers to save money. Finance deals like hire purchase and PCP have fixed interest rates which means if the base rate of interest increases once you’ve taken out a car loan, your interest won’t be affected.