Covid has affected all aspects of our lives. And so it should come as no surprise that it has also changed the way you buy a car.
Speaking more concretely, what does this mean for you?
For one thing, you will now have to order your car online.
And secondly, prices have gone up, defying conventional logic and disappointing all who were hoping for a discount.
But there’s something far more important than that:
The pandemic has had a serious detrimental impact on car finance. As a result of Covid, car finance has not necessarily become a lot more expensive. It has, however, become a lot harder to set up.
For those with financial difficulties or a subpar credit rating, this is bad news. There is definitely a car finance squeeze at the moment. And if your chances of approval were low before the pandemic, they’re probably even lower today.
However, there’s also some good news: The cost of car finance has largely remained stable. Plus, at Concept Car Credit your chances of approval are still very high.
So how does that add up for you? Continue reading to find out.
Why has car finance become an issue?
It’s easy to see why the Corona epidemic should make car finance an issue. It is far less obvious why it wouldn’t become more expensive.
Experts have argued that the reason for this development is twofold.
First, let’s take a look at why lenders have become more cautious. Simply put, they are intimidated by the increasingly volatile economy. There’s something to be said for that. So far, unemployment hasn’t yet exploded. But every day the lockdown continues, more and more businesses are coming under pressure.
Plus, there are indeed first signs that the economy is headed South. In fact, the UK’s recovery may take longer than the rest of the world’s.
Job security has accordingly plummeted.
This is not usually a measure you hear about a lot when it comes to car finance. But it is one which banks and financial service providers take very seriously. Unfortunately, it is also one which can be entirely outside your control: Even if you have a good job at the moment and payment is fine, your job security could be low due to the overall state of the economy.
Job security is a vital risk factor for loan applications. The risk of a default obviously increases significantly, if you no longer have a meaningful regular income.
After the first lockdown rules were announced, it didn’t take long for these insights to have an impact on lending.
According to Moneyfacts, the overall volume of loans went down by almost 60% from April to June 2020. Back then, many finance companies were only accepting applications from “key workers in emergency situations”.
Today, the situation has become decidedly better.
At the same time, it has become more confusing.
On the one hand, lenders are capable of gauging job security a lot better. On the other hand, the outlook remains bleak.
With Concept Car Credit meanwhile, your chances of acceptance remain high.
Of course, we do also take job security into consideration. But because we are capable of offering highly individual payment plans, our loans come with a lower risk of a default.
Contact us now at 0800 093 3385 to see that Covid hasn’t made car finance entirely impossible!
In even better news, the costs of car loans has surprisingly not gone up. As Moneyfacts states:
“The average interest rate charged on unsecured loans is now the same as before the Coronavirus pandemic started.”
How is this possible?
Here’s what we believe has happened: Most banks will be very critical about whom to extend a loan to. Roughly speaking, this is their current approach:
- Those with a low job security and a low credit score are out.
- Those with a reasonable or good job security and a good credit score are in.
- Meanwhile, those with one low and one decent factor are in a grey zone. In the end, they’re probably out, too.
Obviously this is good news if your credentials are good enough for you to get a credit. If you need help with this, read our blog posts about how to reduce your debt and improve your car credit acceptance chances.
Working on this is important. Although there is no reason to lose hope, the car finance squeeze will most likely continue for a while.