For those of you looking to purchase a car, there can be a variety of avenues you can go down to achieve that. One such way is through car finance and it is the most popular option available. It is easier than buying outright and more permanent than leasing a car. However, the APR on a finance package can put many would-be car owners off.
There are different ways of lowering the annual percentage rate (APR) on your finance package. These options include considering which lender you use, the type of car you wish to buy, how long you wish your term-length to be and what your credit rating is.
The age of the car can have an effect on the APR you will pay. New cars do have the option of zero-interest finance agreements. This is obviously a trade off because a new car is likely to be more expensive to buy.
The older the car, the higher the interest rates are likely to be. If you wish to have a low APR, consider getting a new or a nearly-new used car. The likelihood of being accepted on a zero-interest finance package is low for the majority of people, but obtaining a low APR is possible for everyone.
The length of your finance agreement will affect the amount of interest you will pay. The longer the agreement more interest you will pay. The shorter the agreement the more you will save as long as you can afford to pay the monthly amounts. In some case, with the average agreement now lasting 60 months, you could end up paying more in interest than the car is actually worth when you first finance it.
When thinking about the length of your finance agreement, it is best to consider two issues. The first is if you can afford the monthly amounts. That is the big one because if you can’t then you need to consider a change somewhere else in the process.
The second issue is how much extra you will pay in interest payments due to the term length. You can get the lowest APR possible, but if you have a 60-month plus agreement, you will still pay a fair amount in interest.
If you aren’t getting the money to finance your chosen car through private means such as a family or friend, then you will be using a bank or credit union through your dealership. Your dealership, such as Hippo Motor Finance, will find you the best deal from the lenders they work with.
The primary determinant that affects the APR on your finance package is your credit rating. All finance applications trigger a credit check and if you do not have enough points on your score, you will be rejected. If you are rejected, do not keep applying until you have worked out why you were rejected in the first place. Each credit check can knock points off your score if done too often and too close to each other.
There are a few different ways of improving your credit score and therefore improving your chances of being accepted for a finance package and lowering the interest rates on the package. There are both long term and short term techniques you can use to improve your score.
As mentioned previously, the first thing to do is to stop applying for credit of any kind, including car finance packages until you are certain you have sorted out the issues and improved the score.
If you don’t have any history of borrowing or credit, you can easily start by enrolling on the Electoral Register. You are unlikely to be accepted for a finance agreement if you aren’t on the Electoral Register. This proves your identity and proves where you live.
Close any unused account and cancel any unused credit cards. Lenders take into account how much credit is available to you. The fewer, well-managed long-standing accounts with good histories are better for improving your credit score than having the alternative. This also reduces the risk of fraud. By protecting your identity, you are avoiding any additional accounts being opened or a surge in the amount of credit used in your name.
The most important thing to do in the short term is to pay regularly and on time. Don’t miss any payments because this is how you damage your credit score. Keep trying to get your debt down by making regular payments and that will help your credit score to rise because it proves that you are a sensible borrower on top of their finances.
There are two easy ways of improving your credit in the long term. Use a credit builder prepaid card and a credit builder credit card. When used correctly, these are both excellent ways of boosting your credit rating.
A credit builder prepaid card works as a type of loan by a prepaid card company. You sign a credit agreement for a certain amount and agree to pay a monthly amount to pay off the loan. For example, you could ‘loan’ £120 on a prepaid card and pay back £10 a month. This counts as twelve months of successful repayments, therefore count towards improving your credit rating.
The same principle relates to credit builder credit cards. If you continually pay them off monthly and on time, then you are constantly building up your credit score. There is a further risk with these credit cards, however, as the APR on them are higher than normal credit cards. You may end up paying interest rates of over 30% in interest annually. To avoid this, ensure you pay off the balance monthly.
Once you have got your credit score in a healthy position, you will find that the majority of lenders will offer you low-interest rates across the board. However, do aim for a shorter finance agreement to avoid paying large amounts of interest unnecessarily over the period. If you can afford it, also aim for a new or nearly-new used car as the interest rates will also be lower than on older used cars. Car finance is an affordable and easy way of purchasing a car, made easier with low-interest rates.
Many car finance lenders either offer you finance first and then you have to find a car following that. Or you have to have a car before you go to a lender to get it financed. With Hippo Motor Finance, that is not the case. We offer you a car and finance deal as one hassle-free package. You tell us the type of car you want and the budget you have and our staff do the rest. We find the best deal for you and your needs.
We expect more than 51% of our customers to achieve this rate.
|Loan Amount||Total Cost of Credit||Representative APR||60 Monthly Payments||Deposit Amount||Loan Term||Total Amount Payable|
|£7,500||£3831||19.1% APR||£188.85||£0||60 Months||£11,331|
All offers are subject to change at any time, you must be 18 or over and finance is subject to status, vehicle availability and terms and conditions apply. We can introduce you to a limited number of finance companies, a commission may be received. Failure to maintain payments may result in termination of your agreement and the vehicle being returned, this could affect your credit rating and make it more difficult to obtain credit in the future. All prices correct at time of publication.
We purchase a wide variety of vehicles from all over the country to ensure the best quality and value for our customers, all of our cars go through a thorough inspection process and if they do not meet our standards we do not sell them. We endeavour to inform our customers (where possible) the provenance of the vehicle they are buying and as such we will always inform you if the vehicle has previously been either an ex fleet or hire car. Should your vehicle be an ex hire/fleet car please do not be concerned as we would never value this vehicle differently when you come to part exchange it and there is no difference to the CAP valuation either.
You should try and estimate the distance you will travel as accurately as possible to try and avoid excess mileage charges at the end of your contract.
All pictures and/or photos and car descriptions on this site are for illustration and reference purposes only and are not necessarily the vehicle on offer. All offers are subject to change at any time and are subject to finance approval and vehicle availability. All prices correct at time of publication. E & OE.
Hippo Vehicle Solutions t/a ‘Hippo Motor Finance’ is authorised and regulated by the Financial Conduct Authority. FRN 658076. We are a Credit Broker not a Lender and can introduce you to a limited number of lenders. We typically receive a fixed commission calculated by reference to the vehicle model, product or amount you borrow, for introducing you to a lender but this does not affect the interest charged on the agreement, all of which are set by the lender. All offers are subject to change at any time and are subject to finance approval.
We endeavour to ensure that all information including the specifications and finance availability are accurate. Whilst we make every effort to display correct information we are aware that errors may occur occasionally. We are not able, therefore, to guarantee the accuracy of all information especially when given to us by third parties. If you do require clarification of some information you have seen on our website, please email us at firstname.lastname@example.org . This does not affect your statutory rights.
We are a broker not a lender and our registered office is Unit 26 Trident Park, Trident Way, Blackburn, BB13NU.