Borrowing money for a car is much like borrowing money for anything else. In our other article, we talk about the different types of car finance, but in this article we’re going to look at how and check on the likelihood of getting approved.
Is obtaining car finance harder than getting a bank loan?
Getting accepted for finance through a car dealership is easier than obtaining a lump sum from a bank, but this is normally because the finance company - normally the manufacturer - owns the car until you’ve paid all of the balance remaining. The loan is tied to the asset, the car, rather than you like with a traditional loan, so they could recoup cost should they need to.
With finance from a dealership, you’ll also normally have to place down a fairly large deposit of around 10%. It might be easier to get accepted this way, but you’ll need a little more cash in the first place. The same applies for going through online finance brokers.
If you’ve got good credit, getting a loan from your bank is usually the most cost effective option with the lowest rates.
We’ve tried to make navigating this all much easier. Once you’ve checked your credit score, our finance tool will help find the right finance package for you.
Should I check my credit rating then?
Yes, that’s the one. We’d say you should definitely get a credit rating check before deciding which finance path to go down because it’ll let you know where you stand and roughly what your chances are. Unfortunately, there are no certainties when applying for finance, but we’d say that if your rating is fairly low then obtaining finance through the dealership or finance provider would be your best bet. If you’ve got a strong rating and want to own your car outright, then using a bank loan may be a better route to go down or opting for manufacturer finance agreements such as a PCP.
Other things to consider
If the car you want to purchase is relatively inexpensive, you may be able to buy it on a credit card. Credit cards normally have quite high-interest rates, but at lower prices, this is common in bank loans and car finance too. If you just have a short term cash flow shortage, this could be a good move rather than opting for higher APRs through brokers or payday lenders.
It’s also worth remembering that you can lease vehicles. This is like an extended rental basically, and you have to give the car back when the term ends, but obtaining a lease is going to be easier than a bank loan. When it comes to leasing, APRs aren’t involved so it’s all much easier to understand. If not, we’ve broken it down further for you here.