The cost of finance for cars can be quite variable based on the lender, your credit rating, and how much research you do. Even getting an interest rate down by just a few per cent could mean savings of hundreds of pounds on the total cost of your finance deal.
In this guide, we take you through how to secure a low APR car finance deal without having to spend several weeks looking at car loan comparison websites. Car Loan First is partnered with lenders in the UK and can help you get matched with a finance deal suitable for your situation, using just one easy online form.
What Does “Low APR” Actually Mean for Car Finance?
APR means Annual Percentage Rate and refers to the cost of borrowing for one year that includes both interest and other fees. If a lower APR is given, then you will end up paying less when compared to a higher APR for the same amount borrowed. Therefore, it is one of the first things to look out for in a loan agreement.
It is good to know that the APR is your own and depends on a number of factors such as your credit score, income, and down payment. In addition, two individuals applying for a similar loan from the same lender can be given different rates.
Why Would You Have a Different APR From One Lender to Another?
It all comes down to risk assessment. While some providers consider the importance of your credit score, others would prioritise affordability, i.e., the balance between your income and expenses. And this is one of the factors that may result in your being denied by one company but accepted by another at a favourable interest rate.
Moreover, the deposit you put down would affect your APR. The bigger the sum you deposit, the smaller the sum you will have to borrow, and your APR will decrease accordingly.
How Do You Stand a Chance of Receiving the Most Favourable Low APR Car Finance?
Many lenders offer car finance with low APR, so you need to know how well your own credit scores compare before applying to avoid wasting time. There are a few key actions that increase the likelihood of securing the best low-APR car finance instead of hoping for good fortune:
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- Ensure your credit score is up-to-date with no mistakes.
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- Make sure you register with the electoral roll at your current address.
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- Do not apply for a loan from different sources within a short while.
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- Build up a more substantial deposit where possible.
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- Maintain low balances on your credit cards compared to your credit limit.
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- Proof of employment and income should be provided.
All of the above will not guarantee an application for the most favourable rate but go a long way towards ensuring that yours is successful. The lenders just need assurance that your payments will be easy to make.
What Should You Compare Before Choosing a Deal?
The pursuit of the cheapest possible headline interest rate is not always the best course of action. An interest rate that is a bit higher but which comes with a short period or no early repayment fee may end up costing less than the cheapest interest rate, which is subject to certain conditions.
Apart from the interest per month, it will be good to look at the amount repayable during the entire deal. It will also help to compare different affordable car finance deals on the basis of affordability before choosing a deal to make sure that even small structural differences impact the final cost:
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- Total cost of the loan, not only the monthly amount
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- Whether the interest rate is fixed or variable
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- Arrangement, early repayment and late payment fees
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- Overpayment and early settlement option
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- Whether it is an HP or PCP deal
Does Your Vehicle Choice Affect the Rate You’re Offered?
The actual car may be more important to your APR than many consumers realise. Newer and lower-mileage cars may be considered less of a risk to the lender and could possibly result in a small discount compared to an older and higher-mileage alternative.
That is not to say that an old car will not get a good deal. Factors such as reliability and the age of the car at the time of purchase also play a part in the decision process, so it’s good to find out how your particular car impacts the offer.
Should You Opt For a Specialist Lender To Get a Better Rate?
Traditional banks have quite strict requirements, which may reject perfectly eligible customers because of just one reason, such as a sparse credit history. A specialist provider is more flexible when it comes to assessing the ability to pay back a loan, making it possible to get better offers from them if a customer does not meet traditional criteria.
In the case of UK customers with a good credit rating who are searching for a low APR car finance in the UK, this information becomes especially useful because certain companies keep their best rates only for this type of borrower.
Broker Assistance For the Right Deal
Applying to a few different banks individually takes a lot of time, and each tough search leaves a footprint in your credit report. This is not how a broker operates. Instead, he looks at your data and sees how it matches with a selection of lenders all at once.
The other thing about a broker is that he may be able to lead you to the right lender, no matter whether you are looking for a high-interest offer or just a normal low-interest car finance.
Deal that Fits Your Budget!
Looking for a great deal is not about getting lucky, but rather about being prepared, making comparisons, and knowing what information to seek. Looking up your credit file, putting away a down payment, and comparing at least two lenders is far more effective than applying without doing any research. The same thing applies whether you’re looking for affordable financing for an old hatchback or an expensive new one.
This process becomes easier because Car Loan First allows you to compare offers from different lenders through one single application, which checks your information against lenders in the UK. This will give you a chance to look through low APR car finance deals offered by various lenders without having to apply to each of them separately. Apply now online for a no-obligation offer!
Are you ready to compare? Apply for a free quote from Car Loan First and see the rate you could get!
Frequently Asked Questions
Why did I receive a better APR than what was advertised online?
These rates are normally the best that can be found online and are always for a small number of successful applicants who happen to have great credit ratings. Depending on your credit rating, earnings, and the bank’s requirements, your interest rate can either be lower or higher than the advertised one.
Do applications to different lenders affect my credit rating?
Applying for a loan from different companies at once may slightly affect your credit score negatively. However, using an online mortgage broker that performs a soft search before going ahead with the application process can reduce the effect.
Is it possible to have a lower APR even with a small deposit?
Yes, although having a lower amount of money as a deposit means you will need more, which could increase your interest rate. There are other banks that offer loans at good interest rates despite the low deposit amount.
Is it always better to go for a fixed APR than a variable one?
No. A fixed APR provides stability of payments over the entire term of the contract, which is beneficial for most individuals. In some cases, a variable rate may be cheaper if market rates. It all depends on individual risk tolerance and the duration of ownership of the vehicle.
What kind of money can I save from having a better APR?
A small difference of 1 or 2 per cent can amount to hundreds of pounds over the loan term of 3 to 5 years, depending on the loan amount. This is why comparing a few different offers before making a decision is always worth doing.
