For a long time we have seen the car finance market flourish. With low unemployment, positive financial futures 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 many years, and the brakes have been well and truly applied to the global 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? Well the main thing 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.
The follow on affect from this is that the amount of brokers who can get you a cheap car loan has now shrunk dramatically. This is particularly true when the finance 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 big finance companies, now restrict the number of non conforming car loans they are offering to the market and particular brokers each month. So many car 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.
Less competition might sound bad for the consumer but it is does not have to be the case. It has become more important for people seeking car finance 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 secure you the deal. It is still likely to be more expensive to go directly to a bank or lender directly.
One danger 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 have the ability to offer a wide range of car finance options to suit your situation. One that can evaluate your financial situation and future economic position to recommend the cheapest loan option available for the car you would like to buy.
When working out how much you can afford to borrow, there is more to be considered than just the interest rate. should allow for the added costs of registration, car insurance, any other necessary 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 to budget how much you can afford to borrow and also prepare you in advance with your day to day budgeting.
A good car loan broker will have a wide variety of loans based on your economic position. 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 convince you to take a loan because it is one they still have the ability to sign.
One word sums up the current world economy… erratic. This means you should also be considering for a flexible loan, especially for new cars. Check the fine print if you want to pay out your car loan earlyor refinance in the future to a different loan.
Having a loan already arrangedfor the amount you want to borrow also gives you more buying power when you go shopping for a car. You know your limits and the seller will need to negotiate to meet you demands if they wish to make the sale. It will also reduce you into using finance companies they are have deals with, whose conditions may not be suited to you.
It is more vital than ever to do your homework when searching for a car loan. Stick to the trusted established brokers with strong financial backing and refuse offers of free finance or convenient finance lots of fine print and conditions.
