6 Common Car Finance Myths Busted

The world of car loans is a complex one and navigating through it can be daunting, especially if you're trying to work out how much car finance you need. There's loads of online information designed to help car buyers find their dream ride on a budget, while avoiding the pitfalls that often come with car finance deals.

While these articles provide excellent guidance, they are usually filled with jargon and only focus on a tiny part of the entire process. Additionally, they are full of common misconceptions that car salespeople tout. And most likely, you are left with more questions about the finance process than you walked in with.

We've put together this list of 6 common car finance myths so that when you get to the dealership, you're armed and ready to take on anything they throw at you.

Myth 1: Applying for Loans Is a Lengthy Process

This is one of the several myths circulated about getting a car loan, which has led many people to believe that it takes weeks or months to get approved for a loan. In fact, it is common to hear people say that applying for car finance is a lengthy process, but the truth is that it is not as long as many people think.

In reality, there are many lenders and dealers who can approve your application quickly. If you have good credit history, you can get your car finance approved in a few days or at most a week. Additionally, applying for loans online makes it even faster because you do not have to fill out paper forms anymore and wait for them to be processed manually.

In this digital space, most lenders will offer pre-approval over the phone or online, so you can get an idea of how much you qualify for before even filling out an application. This saves you time and energy as you don't have to fill out an application unless you're comfortable with the amount they offer. You can even decline the offer and look elsewhere if it's not enough.

Myth 2: You Need a Good Credit Score Before You Can Borrow Money to Buy a Car

It's a common misconception that you need a good credit record to borrow money to buy a car. While it is true that the loan provider will take your credit score into account, it is not the only factor they look at when deciding whether or not to lend you money.

The most common way of getting around this issue is through car financing companies working with people with less than perfect credit. These companies have agreements with banks and other financial institutions to provide them with loans for their clients who cannot secure financing on their own.

Other car financing methods include rent-to-own financing or layaway plans, where you pay small amounts monthly.

Myth 3: You Need Collateral for Car Finance

This is one of the most common car finance myths, but it's also one of the easiest to debunk. You can still get approved for car finance without collateral if you have bad credit or no credit history.

Most lenders require that you have a stable income and a steady job before they'll lend you money, so if you're working full time, this shouldn't be an issue.

Myth 4: Interest Rates Are Always Fixed

Interest rates depend on various factors, so they aren't permanently fixed. The interest rate depends on several factors, including the credit score, loan amount and repayment tenure.

A high credit score will get you a lower interest rate, while a low score will lead to higher rates. Similarly, if you opt for a large loan amount and want it repaid in a short time frame, banks will charge higher rates as well.

Myth 5: Buying a New Car Will Cost You More Than Buying an Old One

This myth is one of the most pervasive in the car finance world. It's simple to understand how this myth came about – when you take out a loan for an expensive item like a new car, you often have to pay more interest than if you bought a used car.

However, when looking at the overall cost of ownership, buying new can be cheaper than buying used.

Myth 6: You Need a Deposit to Qualify for Car Financing

In reality, some lenders may not ask for a deposit if you have a good enough credit history and income. The majority will require a small deposit from around 5-20% of the vehicle's value as security against bad debts.

In other words, they will take this money out of your account if you don't pay your monthly repayments to cover their losses.

Similarly, if you don't have any savings or assets, it might be harder for you to get approved by some lenders. However, options such as guarantor or unsecured loans are still available where no security is required.

Experience  Better Car Financing

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Contact us today and experience a great rate and even better service!

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.