Car Finance Explained

Thought You Couldn’t Get Car Finance? – Think Again

At Credit Expert, we are committed to helping more people get the car finance they need to buy the car they want. This Credit Expert Guide to Car Finance is all about ensuring you understand car finance and its benefits. It is also about explaining the application and underwriting process to help us give you a favourable lending decision.

Keeping Things Simple

There are a variety of car financing options and associated jargon in the car finance industry. If you want a more detailed guide to car finance, the Finance & Leasing Association (FLA) offers an impartial guide that you may find helpful.

In the meantime, here at Credit Expert, we will provide you with the highlights of car finance and how we assist our customers.

Financing a Car: How It Works

To buy a car, people can use their savings, take out a loan, or, most commonly, utilise specialist car finance, which is what we provide.

Car finance is a way to buy a car without paying the entire cost upfront. Instead of paying the entire cost of the car in one go, you can spread out the cost over a set period through fixed monthly payments. This makes owning a car more accessible to a broader range of people.

Car Finance and Regulation

Car finance is highly regulated, and Credit Expert is authorised and regulated by the Financial Conduct Authority (FCA) as a Credit Broker. The FCA sets high and clear standards for consumer protection across financial services and holds firms to account if they fail to meet them. 

Car Finance Options

There are a range of car finance options, but at Credit Expert, we focus on Hire Purchase, or HP, which is the most common option used to buy a used car.

Our HP option offers:

• Flexible repayment terms (from one to five years) to help fit in with monthly budgeting.
• A low or potentially zero deposit.
• Fixed interest rates so borrowers know exactly what they’re paying every month for the length of the term. If interest rates in the economy change, you can rest assured that your monthly payments remain fixed for the duration of the agreement.
• No excess mileage or end of agreement condition fees.

Secured Hire Purchase for Low Credit Scores

Available to all borrowers, Hire Purchase can be particularly helpful for individuals with a low or no credit score. Being accepted for a ‘secured’ Hire Purchase can be easier than obtaining a personal loan, as the vehicle being financed serves as security for the lender and the lender owns the car until the final option to purchase fee is settled.

Borrowing Amount and Affordability

The amount of money that people can borrow for car finance varies based on several factors; the most important thing for lenders is to be as confident as possible that a customer can afford a long-term monthly payment.

As a responsible credit broker, at Credit Expert, we work with each customer to understand their income and expenditure details. We always want to ensure that customers do not overcommit themselves and are safely able to pay their essential monthly bills.

We also want to ensure people appreciate that a monthly car finance payment is just part of the long term cost of running a car.

Factors in Establishing Hire Purchase Affordability

Other factors in determining Hire Purchase affordability include the amount borrowed, the finance term, and the interest rate applied to the agreement.

For people with a poor or no credit score, the interest rate will invariably be higher than for those with a good credit score, as the risk to the lender of offering a loan to such borrowers is higher.

Affordability – an extra Credit Expert Option

At Credit Expert, being a responsible credit broker means that we cannot help every applicant. However, if, after working with you, we conclude that the amount you are looking to borrow is too great a risk for both of us, then we may still be able to help.

Remember our ‘’Thought You Couldn’t Get Car Finance? – Think Again’ approach. The final option is to see if we can offer you an acceptance for a lower amount of borrowing, which may involve considering a more affordable car. Again, we will work with you if this becomes the case.

Interest Rates and the Annual Percentage Rate (APR)

When you borrow money as part of a finance agreement, the price you are charged for doing so is called the interest rate. The level can sometimes be dependent on your credit history.)

We’ve touched on interest rates, so here is a little more on what that means and what the Annual Percentage Rate, or APR, means.

 When you borrow money as part of a finance agreement, the monthly cost includes ‘capital’, which is money you have borrowed and interest, which is a charge for borrowing the money. The interest rate is often dependent on the creditworthiness of the person applying for a loan or car finance.

The APR describes the annual cost of a finance agreement, including interest rate charges and any other fees specified in the agreement, such as administrative fees. By law, the APR must be shown on relevant documentation presented to customers in showrooms.

You can use the APR to compare the cost of different finance products, but always be aware that the comparison needs to be based on the same amount of money being borrowed over the same time period to be accurate.

Finally, just because a lender advertises an APR, it does not necessarily mean that it is the rate you will be offered.