Car finance is one of the most popular ways to get a car but should you finance a car online? It is becoming increasingly harder for drivers to own their car outright due to high purchase prices, so car finance helps to spread the cost. When car finance first emerged, it was traditionally only offered by banks or lenders through a dealership.
There are many online car finance lenders and brokers who can help sort your finance. It can be scary to make such a big purchase over the internet, but many consumers have adopted the online finance route with open arms. If you’re unsure about buying a car online, the guide below is here to help you decide if it’s the right choice for you.
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How to finance a car online
You can finance a car by applying online with a car finance lender. Alternatively, you can consider using a finance broker to help sort your deal. A finance broker has access to multiple lenders at once and can help you compare finance deals without having to make multiple applications. You only need to apply once with a broker, and they put your application in front of the most suitable lenders for your situation.
This can be a great tool to use if you’re struggling to get approved with a lender due to bad credit. Brokers use the finance first approached to get you the best deal for your circumstances first and then using your monthly budget, customers can then shop for cars they can afford. Usually, you have the freedom to use any participating dealers in the UK, as long as they are verified by the Financial Conduct Authority. However, some lenders may require you to get a car from their stock or a participating third party.
What are the benefits of online car finance?
There are so many reasons why getting online car finance is appealing to drivers over financing through a dealership.
- Easy and convenient.
- Save time and money.
- Find the best finance deal in an instant.
- Compare multiple lenders at once.
- Get the car you want within your budget.
- Explore different forms of car finance and find the right one for you.
- No pressure from pushy salespeople.
It wouldn’t be fair to look over the advantages of financing a car online without considering why it may not be the right choice for you. Below are a few disadvantages of getting your car finance online.
- You won’t see the car in person if the dealership is not local. However, if the car is not fit for purpose or as it was described, you will be covered by the Sale of Goods Act when you buy from a dealer.
- It can be harder to negotiate as you will be limited by your finance budget and the rates set by the lender.
Should you get finance through a car dealer?
For many drivers, they like the ability to walk into a dealership and find a car they want to finance. Once at the dealer, you can make a credit application and apply for finance with the lenders on their panel. This can sometimes be limited and if you have bad credit, you may struggle to get approved. If approved by multiple lenders, you can then choose the lowest rate offered. Once the cars ready, you can then drive away once the finance has been approved.
What about buying a car through a bank?
Buying a car through a bank or building society is known as a bank loan or personal loan. A personal loan is when a bank agrees to loan you a required amount of money which is deposited into your bank account. You then pay back the loan over an agreed term each month. When buying a car, you can purchase the car from anywhere, including private sellers and pay for it like a cash buyer. You will own the car from the start of the agreement and there are no mileage or damage charges as the lender does not own the car.
Top tips before taking out finance:
Whether you are choosing to finance a car online, through a bank or at a dealership, there are a few considerations you should think about first.
- Check your credit score. Your credit score is really important to the finance process. It helps lenders to get an idea of how good you are at managing credit and finance and make predictions about how you’re going to handle your future credit. A low credit score due to missed payments or high levels of debt can increase the risk to future lenders and you are more likely to default on your future finance.
- Set your budget. Lenders need to know that anyone they offer money can afford to pay it back on time and in full. Before you apply for finance you should assess your finances and set a realistic monthly budget. Finance agreements such as hire purchase and personal contact purchase are secured which means the lender owns the car. Failing to repay the lender means they have the right to take the car off you.
- Check reviews of the dealer and finance company. Before you enter into any sort of agreement or buying a car, you should check out the reviews of the company and the lender. Be aware of any negative reviews and stay away from any dealership who have less than 5* reviews from their customers, especially if you’re buying online.
