There are a lot of factors to consider when buying a car. You’ve got colours, interior trim and the type of technology to take into account, as well as what kind of engine - or electric motors you would prefer.
However, you also need to consider payment and, if you’re going down the finance route, you’ll need to think about your credit score, too. But what credit score is needed to buy a car, and what else do you need to know?
What is a credit score?
A credit score is a three-digit number which, essentially, showcases to lenders how trustworthy you are when it comes to repaying a loan. The higher the score, the lower the level of risk to lenders, and this usually comes through paying bills on time and never becoming overdrawn on credit cards.
A lower score, meanwhile, usually represents someone with a worse credit score. This can come through a lack of history of on-time repayments.
Are there any ways to improve poor credit scores?
If you’ve got a poor credit score, then there are some ways to help it out. Making sure that you’re on the electoral register is a quick and easy way to improve things. Trying to reduce the amount of debt you have will always help, too, as lenders will look at both the amount of debt you have and the level of income you’re getting.
Ensuring that you aren’t missing other payments is essential - setting up direct debits is a great way to keep up-to-date.
How does it change the way you buy a car?
A poor credit score will, naturally, hurt your ability to take out car finance. Here at Prestige Cars Kent, we’re here to help, so if you are struggling with your credit score - or need advice on how to take out finance on a new car - then get in touch today and we’ll be able to advise on the best course of action for you.
Lower credit scores might make it trickier for you to be approved for car finance, but many lenders will try to get you behind the wheel of something new.
What about a guarantor?
If you’ve got a poor credit score and are struggling to get car finance, then some lenders might be able to secure you an agreement if you provide a guarantor. Essentially, this is someone liable for the loan should you not make the repayments and this process, essentially, lowers the risk for lenders.
Not all lenders offer this option, however, so you’ll need to speak to them beforehand. If this is something you’re interested in, speak to our team and we’ll be able to advise.
Here at Prestige Cars Kent, we offer three main types of finance. Let’s take a look at them.
Personal Contract Purchase (PCP)
Personal Contract Purchase - more commonly referred to as PCP - is one of the most popular forms of car finance. With this agreement, you’ll make an initial deposit, which is then followed by regular monthly payments across a fixed term. You’ll agree to a mileage limit, too.
Towards the end of the agreement, you’ll be offered the option of paying the outstanding amount on the vehicle - called a ‘balloon’ payment - or return the car to the vendor and finish the agreement right there. From that point, you’re free to start a new finance agreement on another car should you wish. You could also part-exchange the car and use that amount to start a new finance agreement.
Hire Purchase (HP)
Hire Purchase - or HP - follows a similar theme to PCP. You’ll make a deposit, which is then followed by regular monthly instalments. However, your monthly payments will eventually pay off the vehicle and, as a result, they’ll usually be a little higher than a PCP agreement.
However, once you’ve reached the end of your finance period, the car is yours outright. You’re then able to drive the car without the need to make any more payments, or you could even sell the car if you wish.
Lease Purchase
Lease Purchase lies somewhere in the middle of HP and PCP. You’ll still pay a deposit and a monthly payment, but unlike PCP, you can’t walk away at the end of the agreement without buying the car - you’ll need to either pay off the final amount or arrange another finance agreement.
It contrasts with an HP agreement, as with that setup, you’re paying off the value of the car through those monthly instalments without the need for a final ‘balloon’ payment.
We’ve got plenty of finance options available here at Prestige Cars Kent. If you’d like to find out more, then check out our dedicated page or get in touch with a member of the team to answer any burning questions.