Buying a Car on Finance: Good Idea or Bad?

There are just two ways to buy a car; you pay cash for it or finance it. Which one is the best option? It depends on several factors such as your credit history, your savings, your monetary state, your income, and so on. In other words, buying a car on finance or cash has its pros and cons.

If we have to tell you whether buying a car on finance is a good or bad idea, we will list the positives and negatives here and let you decide what’s best for you.

Good: With a used car financing, you can get your ride on a very low down-payment and up-front cost, secure a reasonable APR, build your credit rating, keep your savings intact and afford to buy a better vehicle.

Bad: On the other hand, car financing leads to higher overall cost due to added interest, it gives you very less negotiation control, and it does not let you own the vehicle until you pay all outstanding amounts.

While buying a car on finance is not a bad idea; purchasing one with outstanding finance certainly comes with many troubles. You not only risk the money you have paid for it but will also lose it.

What checks are done for car finance?

Before lending you for a new or used car, a lender always carries out a hard credit check, which involves a credit agency like Experian or Equifax. A car finance checker reports your monetary history and present financial standing to the lender. Only when the financer is satisfied with your financial position, you can secure a car loan.

Answering this question from another perspective, to check if a car has outstanding finance, you can run an outstanding finance check. A vehicle finance check is an ideal tool to discover a car’s loaning history. Find out a car on finance.

Please note that the banks or lenders do not check car history before loaning. They rely on the report from credit agencies.

What credit checks do car finance do?

A car finance lender only carries out one credit check, and that is a credit score check. They perform this analysis to make sure you can repay the loan they are going to approve. As said earlier, the bank or the financial institution takes assistance from a credit agency to understand your financial position.

A good credit score translates to lower interest on the loan and quick application approval. Please note there is no such thing as no credit check car finance. All lenders do perform credit history checks.

While the financer is busy inspecting your credit score, you should also be aware of the loan types available to you. Four main types of car finance include Personal Contract Purchase (PCP), Hire Purchase (HP), Lease, and Personal Loan. Know more about the types of finance here

How to inspect if a car has outstanding finance?

Unfortunately, a vehicle finance check is not something you can do by just seeing the vehicle or reading its logbook. This information is held by the finance house and the credit agency. Therefore, you can either contact the lender or the credit firm to get the details. That said, you have to follow their procedures and have to pay to obtain the info on a car loan.

An easy way around this is taking an outstanding car finance check at Car Analytics. Our cheap car finance check will mention in ‘Yes’ or ‘No’ if there is an outstanding loan on the vehicle as well as tell you when the finance agreement was made, the type of contract (PCP, HP, or lease), the finance house who owns the vehicle, and their contact number.

Our car finance check is a part of our full vehicle history check that will cost you £8.95 (the cheapest in the UK). Besides the vehicle finance information, you will also get to know if the car is stolen, scrapped, clocked, written-off, and so much more. See our sample vehicle data report here to get a better idea of our car check.

Bear in mind; that there is no such thing as a free car finance check. All Car Data History providers charge for this report because they have to pay the credit agencies like Experian Ltd. to get the vehicle finance details.

Is car finance worth it?

Do you know 86.5% of new private cars were purchased through finance in the 2016/17 financial year, and in 2018, 1.4 million second-hand vehicles were purchased on finance? Seeing these figures, we can tell people like buying a car on finance. Whatever are their reasons, financing a vehicle does have several advantages; it’s simple to obtain a good rate on loan, it heads to a smaller upfront cost and offers you a means to acquire an excellent car without blowing past your reserves.

Is it worth it depends on your financial situation? If you have the money for a car purchase, it might be better to buy it with cash because it is the cheapest option and you own the vehicle from the day first. But if not, financing could be the next best option. Just make sure you pick the right financing plan.

Best way to buy and sell a car

The best way to sell your vehicle is by selling privately. The next best choice to part ways with your possession is dealer part-exchange, followed by a vehicle buying website. All these have their pros and cons, so what is the best way depends on your current situation. 

Oppositely, suppose you are looking to buy a car. In that case, you again have multiple choices such as purchasing from a private seller, car lot/car supermarket/ vehicle auction showroom, car dealership, or Car Analytics classified service.

Still confused, about how to buy and sell used cars, read our detailed guide on buying and selling.

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Buying a car on finance is certainly not a bad deal if you can afford the monthly repayments. However, the same is not true for vehicles with outstanding finance on them. The best way to avoid buying a car with the outstanding finance is to run the car finance check, and for that, you know where you should look for!