The car finance industry has been booming over the past few years. In 2018, over 80% of UK drivers bought their car on finance. Car finance is a great way to spread the cost of owning a car into affordable monthly payments. Over the years, new types of car finance agreements have been introduced to suit different lifestyles and affordability options which attracts more and more drivers every year. But what will the future hold for the car finance industry? Refused Car Finance, a car finance provider in the UK who specialise in helping people gain car finance with bad credit, examines the current pros and cons of getting your car on finance and what the future holds for the industry.
Why should you buy a car on finance now?
As mentioned, car finance is a great way to spread the cost of owning a car. There are a few different types of car finance. Usually, depending on your circumstances, you will be accepted for a loan amount on a car and then make fixed monthly payments until the end of your agreed term. There are also many no deposit options available so you don’t even have to pay anything up front! However, if you do have some savings to put down for a deposit, it can lower your monthly payments! In a finance agreement such as personal contract purchase, you don’t own the car until you have made all of the payments. This is beneficial for people who regularly like to change their car. Car finance applications also tend to be quick and easy and some lenders can even get your approved within the same day and into your new car within a matter of days! Cars on finance also tend to be newer cars which should reduce maintenance costs, running costs and any unexpected repair costs.
Should you avoid car finance?
The answer to this one depends primarily on you and your current financial situation. Car finance is becoming more accessible, even for those applying for car finance with bad credit. For a long time, it was frowned upon to offer car finance to people who had a low credit score. This is due to the risk that they possibly couldn’t pay back their loan and may get deeper into a financial hole. People with bad credit will usually be offered a higher interest rate as they are seen as more of a risk to lenders. But, as long as you can comfortably pay back your car finance each month and are given a fair deal from a trusted lender, then car finance shouldn’t be a problem! Also, be wary of anyone offering ‘guaranteed’ car finance. It goes against advertising standards to promote that anyone can gain car finance.
What is the future of car finance?
There has been some concern raised around the car finance industry in the media. The current state of the car credit market has been labelled ‘unstable’. Car finance can offer you a brand-new car with low monthly payments which is very attractive to many consumers! When you sign a car finance deal, you are agreeing to make all your payments in full and on time for the agreed term, which can be between 2-4 years long. Unexpected circumstances such as redundancy or loss of income can mean that you are unable to pay your finance for a few months. This had led the Financial Conduct Authority (FCA) to be warier of irresponsible lending from finance companies and how car finance is sold/advertised. Already, more companies are becoming stricter with who they accepted for car finance.
It has also been argued that adults these days are less committal, whether that be in relation to money, jobs or relationships. Meaning that they do not want to be tied in to a lengthy agreement term and strict monthly payments which could see a decline in the car finance industry.
The past few years has seen an increase in issues raised towards diesel cars and their effect on the environment. The 2040 diesel ban means that no new diesel cars will be sold in the UK after 2040. In 2019, the sale of diesel cars dropped by 29.6% in the UK which could indicate a decrease in diesel finance in the coming years. Could this have a positive impact on electric and hybrid finance deals? Hybrid and electric models usually have a hefty initial deposit to put down, which can scare consumers off but with the decline in diesel, this may reduce in the run up to 2040.