Used car finance 2022: How to get the best loan

Used car finance 2022: How to get the best loan

1 March 2022 Concept Car

Let’s face it: 2019 and 2020 were horrible years for the car industry. Car finance, too, suffered tremendously.

But for car buyers, they were pretty amazing.

With dealers trying everything they could to lure in customers, suddenly everyone could get a loan.

The thing is: With the pandemic raging, very few did. And now, two years later, the situation has reversed completely.

You’ve probably heard about car prices exploding.

Not only is this true, but it’s most likely worse than you thought.

What does this mean for you if you’re looking for car finance in 2022? In this article we’ll explain everything you need to know – and we’ll give you some advice on how to improve your chances.

Things may not look good. But there are still plenty of good deals to be had.

Car finance in 2022: What is the situation like?

In 2019, the car market seemed dead. No one wanted to buy a car – almost literally! Sales numbers imploded, car lots closed, the online market wasn’t ready yet to fill the void. The big question was: How long would manufacturers and dealers be able to survive on the strength of their savings?

As Covid has become a fixture in our daily lives, the market has rebounded.

In 2021, car sales were considerably up again. Consumers are no longer afraid to commit to a purchase. Or they may simply no longer be able to put off buying an automobile.

In fact, sales have been up so much that some are already talking about the market overheating. Certainly, the boom has created a situation where prices are skyrocketing. Which is bad news for anyone with a tight budget.

The reason for the price explosion is mainly a supply issue. - Concept Car CreditThe reason for the price explosion is mainly a supply issue.

Of course, increased demand is a problem, too. But the main driver for the current car market misery is the supply side.

The pandemic had a huge impact on global supply chains. Many of the materials required for automobile IT was suddenly no longer available at the necessary volumes.

This was not a particular problem during the pandemic peak when demand was low anyway. As the markets are recovering, however, it is turning into a huge issue. Manufacturers simply can not build as many cars as they like, because they do not have all the resources they need.

Some brands have been hit harder than others – Ford in particular comes to mind. But the problem affects the entire sector. And the way it looks, the supply of these materials is going to remain difficult for a while.

So, how has all of this changed buying a car?

Waiting times have become excruciating.

If you’re looking to buy a new car, you may have to wait a few months for your model to get delivered to you.

This is not entirely unheard of. In-demand models were never instantly available. However, this time around, the waiting times affect pretty much all cars on the market – albeit, obviously, to different degrees.

How long will you have to wait? Expect anything between three to six months or even more!

The used car market is losing its supply as well.

As less new cars are being produced, the second hand market is losing its formerly abundant source of supply.

The effect is not dramatic yet. One of the things that made the UK used car sector so great was its abundance: There were always plenty of cars to chose from. It will take a while before desperate buyers have completely grazed the market clean.

That said, for some models, the choice is already growing thin. Which doesn’t mean you won’t be able to get what you would like. But slowly but surely, the situation is approaching that for new cars: You can always get what you want, but you may have to wait for it a little.

As a result, used car prices have gone up considerably.

Some buyers simply do not want to or can not afford to wait half a year to get a new ride. As a result, they are turning towards the second hand lots where they could potentially drive home with a “new” car the same day.

What this means is that, relatively speaking, buying a new car has become more attractive. And the benefits of used are no longer as obvious. In some cases, used cars are even more expensive than their factory fresh counterparts!

Even if there are still plenty of decent deals to be had, even moderate price hikes can make the difference between being able to afford a car or not for some households.

More importantly, car finance deals are no longer as good as they used to be. - Concept Car CreditMore importantly, car finance deals are no longer as good as they used to be.

It’s easy to see, why.

Consumers are almost literally fighting over available vehicles. Dealers could cancel all ads and they’d still sell out their entire selection without any problems.

Which means that finance companies see no reason why they should provide credit to anyone but the best applicants. There’s no need to be lenient towards those with a bad credit rating because there are always plenty of picture perfect buyers to take up their place.

Buyers can no longer afford to be picky when it comes to rates.

Obviously, finance companies and dealers need to be careful not too make things too expensive. But they can clearly command better rates than they could in a long while.

And so, even drivers who would have easily met the requirements before the pandemic are now left in the cold.

So … should I wait before applying for a car loan?

This is an important question. If things are so bad at the moment, it seems evident in a way that holding off on a car purchase would be the wise thing to do.

This isn’t necessarily so, however.

Yes, prices are up, choice is slim and waiting times are longer than they’ve been in a while.

However, most experts agree that the situation is unlikely to become more consumer-friendly anytime soon:

  • There is still a lot of pent-up demand.
  • The supply chain issues are going to plague the new car market for at least a year.
  • The effects of the new car market rut are going to hit the second hand sector with a delay. Which means that used cars are going to get even more expensive before they get any cheaper. (if at all)
  • Cars prices tend to traditionally go up in the Summer. Which means that if you can’t buy a car now, you may have to wait until Autumn or even Winter before they come down again.

As bad as things are right now – you may still be best off buying sooner rather than later nonetheless.

That said, there's no reason to get depressed. - Concept Car CreditThat said, there’s no reason to get depressed.

Granted, we’ve given you plenty reasons to be worried or sad or let down. However, underneath it all, buying a car in 2022 is pretty much still the same process it has always been.

As recent reports demonstrate, car finance is on the rise.

The volume of car loans in 2021 was considerably above the level for the previous year. That may partly be down to the fact that it was so low in 2020 and to the fact that car prices were rising and, thus, loans had to rise as well. But certainly, finance providers are not sitting on their money. They, too, are eager to start lending again.

So there is no reason to expect that you’ll get rejected by default.

Let’s start thinking about how you can improve your chances of getting accepted.

Work on your credit rating

We’ve said it before: Your credit rating is not the most important thing in the world when it comes to car finance. That said, we don’t agree with those claiming that credit scores do not matter at all.

Credit ratings provide for a quick, simple assessment of your past financial behaviour and your reliability to pay back a loan. No, they’re not perfect and, without complementing them with the related credit report, do not tell the full story. However, they are definitely useful.

Right now, lenders will only all too gladly make use of simple tools like credit ratings to speed up their process.

We’ve written about how to fix your credit rating on this blog before. Make sure you do everything that’s in your power to improve.

Further Reading:
What is the minimum credit score I need for a car loan?

Try and see if you can cough up an advance payment

Car finance in 2022 is all about trust and making a difference. Down payments are the best way to do this.

With a down payment, you are signalling to a potential lender that they can trust you to pay back the money. It shows commitment and long term thinking: By paying a part of the outstanding sum upfront, you will actually save money, even though you may have less at your disposal at present.

How much makes for a substantial amount? 10% seems like a bare minimum and you should be able to commit to that any time. More is better, obviously.

Further Reading:
How to improve your car credit acceptance chances
Are zero down payment auto loans a terrible idea?

Reduce your expectations - Concept Car CreditReduce your expectations

Everyone has a very clear idea of what kind of car they want. Now, however, is not the time to set your expectations sky-high.

Popular models have become even more expensive than they used to be. Also, they are severely fought over and any offer – good or bad – won’t be available for long. Which means chances of getting lucky are low and you may have to make a snap decision. Which is never a good thing.

A great approach is to look for the cars which are currently low in demand. We’ve already written about that a short while ago – some of the most interesting models at the moment may surprise you!

Make use of trade in opportunities

Buying a car hasn’t been this hard for some time. Selling a car, on the other hand, hasn’t been this lucrative.

So if you have a car to part exchange, this can significantly improve your chances of getting a good deal.

It would be a mistake to, as some so-called experts keep repeating, separating the two – i.e. looking for a good deal first and only then letting the seller know about your potential trade-in.

In fact, your current car is the best asset you have for securing finance and clinching the deal.

Ideally, you can offer the seller the following package:

  • A car for trading in.
  • A respectable downpayment.
  • A reasonable model which is within your budget.
  • A decent credit score

Can’t meet all these criteria or even none? At CCC, we should be able to help you anyway? Just give us a call at 0800 093 3385.

1 March 2022 Concept Car