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 myriads of loans from competing companies. 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 dealer 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.
  • Since it has become extremely easy to apply for a loan online, 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.

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, you should be looking for when considering an online car finance deal?

Online car finance: What to look for

In many respects, an online car finance deal will be very similar to a loan with a physical dealer. As 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.
  • Make sure to verify what the terms and conditions of your application are and to never apply for too many loans at once.

By taking these aspects into consideration, online car finance will not only be as safe as traditional models – but end up saving you a lot of money.