Jan
29
For many years we have seen the car finance market prosper. With low unemployment, positive financial outlook and a general feeling of financial security, there have been so many car loans available that almost anybody could get car finance. Then along came the biggest economic downturn for decades, and the brakes have been well and truly applied to our economy and in particular lending markets.
What does this mean to the regular person on the street who wants to borrow money a new car? The main difference that has happened is that lenders have tightened their lending criteria. Due to economical uncertainty, job losses, and rising costs, lenders are more cautious with who they will lend their money. They feel the risk of defaults is higher, so they are more careful when approving finance for cars, boats, trucks and other equipment.
A consequence of less loans in the market is that the amount of brokers who can get you a cheap car loan has now shrunk dramatically. This is particularly true when the loan being applied for is a non standard loan. Bad credit loans, self employed loans, no deposit loans and other non conforming car loan options have become harder and harder to qualify for.
Many of the tier one lenders, such as banks and large finance companies, now limit the amount of non conforming car loans they are willing to offer to the market and particular brokers each on a monthly basis. So A large number of finance brokers find it impossible to exist in today’s environment. They simply cannot turn over a high enough volume of loans to make ends meet.
This reduction in competition might sound bad for the consumer but it is not necessarily the case. It has become more important for those research and have their financial history well presented. Interest rates are no higher than before, as long as you can find the right broker to place your loan. It is still likely to be more expensive to go directly to a bank or lender directly.
One trap to avoid is to resort to disreputable lenders or ‘fantasy loans’ that claim to be offering 0% interest, or time periods that are interest free. Nobody lends money for free and you should be aware of that from the beginning. Any loan mentioning such offers have a catch, that could be a very expensive one. It is better to stick to established respected lenders who can still offer a wide range of car finance options to suit your needs. One that can sum up your financial situation and future economic position to and then suggest the cheapest loan option available for the car you want to buy.
When working out how much you can afford to borrow, there is more to be considered than just the rate of interest. should allow for the the other necessary costs of registration, car insurance, any other required insurance, running costs, possible repairs, the potential of rising oil prices, and any account fees associated with the loan.
These costs should be factored in when calculating your monthly repayments. This will help you calculate how much you can afford to borrow and also prepare you in advance for changes to your daily budget.
A good car loan broker will have a wide variety of loans based on your situation. larger their panel of lenders they can utilise or the bigger, better quality their borrowers are, the better opportunity you have to get a good loan. Smaller brokers in the todays finance market will always it increasingly more difficult to get a loan that is actually the right one for you, and may try to push a loan because it is one they still have the ability to get approved.
One word sums up the current world economy… unpredictable. This means you should also be considering for a flexible loan, particularly when buying new cars. Check the fine print if you want to pay off your car loan in a lump sum or refinance to a different car loan.
Having a loan already approved for the amount you want to borrow also gives you more buying power when you go to buy your car. You will be aware of your limits and the seller will need to compromise to meet you demands. It will also reduce you into using finance companies they are associated with, whose conditions you may not fully understand.
It is more important than ever to do your research when applying for a car loan. Stick to the trusted established brokers with strong lending history and avoid offers of free finance or convenient convenience loans with lots of hidden charges and conditions.