Did you know that in May 2021, car finance commitments rose by almost 5%? And, with a higher demand for cars than ever pushing prices up, you must get the best deal.
What’s more, for most people, a car is the second-biggest thing you’ll ever buy, only a house costing more. So with so much money at stake, it’s vital to get it right the first time without damaging your credit file.
But getting the best new car loan can be difficult if you’re not familiar with car loans and credit. So we’ve compiled a guide to help you find the best car loan companies. What’s more, we’ll make sure you’re not driving yourself up the wall wondering who to choose!
Top 8 Things to Consider When Choosing the Best Car Loan Companies
Before you start looking at car loan options, you need to understand how they work. It’s most important if your current financial situation isn’t great. It also you want to pay back more than one credit at the same time.
A car loan is an agreement between a lender and a borrower. The lender provides the funds. In turn, the borrower pays off the vehicle over time using monthly repayments.
The most common type of car loan available is a Personal Contract Hire (PCH). Here, the buyer can make a large payment at the end to own the car. But the buyer also makes regular payments on their contract for a set period in the meantime.
The other alternative is a Hire Purchase (HP). HPs occur under finance contracts. These let you buy the vehicle outright, then spread the full cost into smaller payments.
1. Check Out the Different Types of Lenders
When looking for a car loan company, there are two main types to consider. If you have a good job and plenty saved up, you may borrow from banks. Yet, these days many people are finding it harder to access bank financing.
That’s why we recommend going direct to lenders who specialize in auto loans, such as Plenti Car Loan. These companies offer competitive deals, and they will often provide better rates due to their specialist knowledge.
You’ll notice some lenders offer short-term car loans, and others focus on long-term products. Some lenders even specialize in servicing different sectors, such as commercial vehicles.
2. Read Online Reviews and Ask Around
The best way of making sure you’re going to have a great experience is to ask friends and family. Ask for their experiences, both good and bad, so you get a rounded set of opinions.
Another great place to check reviews is websites like Trustpilot. Many customers will leave feedback about their experiences after purchasing a product or service.
Be careful, though, as these sites aren’t always reliable. They could be competitors or the lenders themselves faking reviews.
What’s more, don’t forget to search around online using different search terms. That way, you can make sure you’re comparing a broader range of deals rather than just focusing on the first results you come across.
3. Look Out for Hidden Fees
It’s easy to get caught up in the excitement of getting a car loan and overlook things like hidden fees. Despite strict regulations, some lenders will cleverly word additional charges or not tell borrowers upfront at all.
Many fail to mention all the charges associated with borrowing money to get a sale. So when looking for the best car loan companies, always make sure you’re getting full transparency.
4. Soft vs. Hard Credit Check
Ask the lenders whether they offer a soft credit check first before lending. That is a preliminary check that doesn’t affect your credit file. Most reputable lenders offer this service, making sure they don’t lower your score.
After all, it might be that you return to them when your credit is good enough. So, losing your business long-term isn’t worth the risk.
5. Compare Interest Rates
Once you’ve found a few car loan companies, check to see who has the lowest interest rates. Ask about any extra fees associated with each loan package too:
Some lenders charge extra fees for late payments, and others may charge extra fees for paying off early. Some don’t offer flexibility options at all.
If you can afford to do so, always try to see what rate and terms are available before applying. You might also be able to negotiate better rates and loan periods with different lenders.
6. Decide Whether to Pay Off the Down Payment Yourself
Think about your financial situation down the line. Can you afford the payments each month? Or, do you foresee being able to afford the overpayments in due course?
It’s worth considering whether you’d prefer to pay off the deposit yourself. That way, you won’t have to worry about missed payments, repaying more than one loan at once.
Paying the deposit yourself means you only need to focus on the agreed monthly payments.
7. Take Your Time
Finally, once you’ve narrowed down your selections, go through each one with care. Make sure you read all the fine print and remember that the best deal isn’t always the one with the cheapest rates!
8. Time to Find the Best Car Loan Companies Around
It’s important to know what kind of car loan works best for you before you start shopping around for the best car loan companies.
Whether you want a short-term or a long-term lender, there are plenty of options available. Remember though: you shouldn’t jump into a deal without doing your research first.
We hope this guide helps you find the best car loan company for you. Check out our next article for more advice that’s on the mark!