Online car finance: Is it safe?

Online car finance: Is it safe?

12 January 2015 Concept Car

Are you in the process of buying a car? Looking for an auto loan, maybe? Online car finance could be the perfect solution for you. In the UK, we love everything online. Ecommerce is still the fastest growing retail market and some of the most well-known brands of today were born on the Web. In the car finance industry, too, online car finance has grown from an exception into a generally accepted standard. Many thousand customers each year apply for a loan on their laptop from the comfort of their home, in many cases saving a lot of hard-earned cash compared to the traditional dealer model.

On the other hand, the spread of online car finance providers has also allowed less serious companies to offer shady deals and lure potential customers in with seemingly attractive offers. Preventing these black sheep from entering the market entirely will unfortunately prove to be impossible. What you can do, however, is to find ways of separating the chaff from the wheat.

Online car finance: A revolution

This is all the more important, since online car finance has indeed revolutionised the entire process of applying for a car loan. If, today, the industry is booming more than ever, this is not just the result of package deals for bigger companies, as recently reported by the Economist. But also because the Internet has allowed you to easily compare an auto loan offered by a bank with that provided by a dealership. This has resulted not just in better rates – and thus lower costs – but also in a more streamlined application process with less bureaucratic obstacles. With more companies available than ever before, you should be able to find the one that ideally matches your needs, resulting in more personalised solutions.

Online car finance: The dangers

At the same time, online car finance is not without its dangers. Apart from the obvious security concerns, which equally apply to other online financial services such as banking, online car finance poses various threats:

  • A website and a phone call with a call center agent can never replace the impression you get when actually visiting a dealership on location. Fancy stock photos can be misleading – and create a misguided sense of trust.
  • Many of the new online car finance companies are fairly new with little financial clout and even less experience. What this means is that you can never be quite sure whether they will still be around in a year’s time – and if they’ll be able to deliver the kind of post-purchase service you need for your car.
  • It has become extremely easy to apply for a loan online. Because of this, there is a definitive temptation to apply for many at the same time. Depending on the verification processes of the dealers, this can negatively affect your credit rating. This is especially problematic if you already have a poor credit rating.

Are these issues significant enough to make you avoid online car finance altogether? Not at all. They are significant enough, however, for you to be as careful as you possibly can. So what, exactly, should you take into consideration when considering an online car finance deal?

Online car finance: What to look for

An online car finance deal will be very similar to a regular personal loan. It will also be a similar to an auto loan with a physical dealer. In some cases, though, online car finance is based on a pre-approved car loan. As part of the process, the lender first checks your credit history, credit score and credit report. Then, they will set up a framework with all the necessary terms and conditions. Only then do you chose a new car.

This is not the default process, however. Mostly, the loan application procedure for car buyers with bad credit is identical to the one for those with a good credit report. As consumerreports.org have pointed out: “Going into the dealership without doing research on how you are going to finance your purchase is setting yourself up to overpay.” The same applies for online car finance. These are the things you should take care of before signing any contract:

  • Make sure you know your financial limits before applying for car finance online.
  • Conduct some research on specific online car finance providers and try to find hands-on information about them.
  • Industry awards can be a helpful indication of the qualities of a particular car finance company. At CCC, for example, we are proud to have won the annual F&I Achievement Award, a recognition of excellence in the industry.
  • Never apply for too many loans at once.
  • Closely verify the terms of the deal. It’s not just the APR that counts!
  • Only agree to a monthly payment schedule that you can definitely keep up.

Where to get online car finance?

You can get car financing with different financial institutions. Potential online lenders include banks, dealerships and specialised lenders. In principle, all of these financial institutions offer very similar terms for your vehicle. The main difference lies in the rate they will offer you.

It may surprise you to hear that car dealers will often be your best choice. Not only can they provide incredible APRs (annual percentage rate). Their terms and conditions are also often excellent, since they can offer you the full package.

Other online lenders can be risky. If you do not want to borrow from a bank or dealer, make sure to compare the rate and look for information about the lender before taking the plunge.

Terms you can agree to

By taking these aspects into consideration, online car finance will be as safe as traditional models. And it may end up saving you a lot of money, too.

Are you looking to buy a car? Then Concept Car Credit is there to help. In our Manchester showroom, we have a wide selection of vehicles for car buyers with many different budgets. Our car financing terms are geared towards anyone with a bad credit history or generally poor credit.

Call us now for a personal loan and more information on your monthly payment schedule.

12 January 2015 Concept Car