What is Car Finance?

  10 January 2022 · Our Blog - Read The Latest Articles

What is Car Finance?

Most of us simply don’t have a large stack of cash ready to put towards a new car. Car finance offers an accessible way to get into a new car without straining the budget. Finance from a reputable dealership is an affordable option that gives you the freedom to buy the car you need today, with no stacks of cash required.

Since car finance is a term you’re going to hear a lot when shopping for a new car, we’re going to take a closer look at what it is and the options at your disposal.

Car finance is a type of personal loan that lets you buy a car with little or no cash down payment required.

Similar to home loans, car finance is usually secured against the value of the car, meaning the car technically belongs to the lender until the loan is repaid.

Because cars cost much less than houses, and because the duration of the loan is short, the risk to the lender is lower than with other loans. For the buyer, that means it’s fairly simple to be approved for car finance and leave the dealership with a new set of wheels and a big smile.

• Secured vs unsecured loans. With a secured loan, the money you borrow is secured against the value of the car, meaning the lender can sell it if you become unable to make repayments. Secured loans usually have lower interest rates and better terms for the borrower.With an unsecured loan, your lender will not be able to sell the car and recover their money. This arrangement suits some people, but unsecured loans are riskier for the lender, and they often come with higher interest rates and shorter loan terms.
• Fixed vs variable interest rates. If your finance carries a fixed interest rate, the percentage of interest you are being charged won’t change for an agreed amount of time. That’s great if you are buying when interest rates are low and you could save money across the loan term.Variable interest rates are the opposite. The interest on your loan will rise and fall with changes to market interest rates and you may end up paying more or less than originally anticipated.
• Bank loans vs dealership finance. Car lenders come in all shapes and sizes, including traditional banks and those who work directly with dealerships.For many, it’s often simpler and cheaper to access finance through their dealership. Dealers have relationships with their lending partners that mean they can offer better loan terms and a simpler experience that takes care of your loan as part of the process.

Downtown Toyota connects customers with Toyota Access car loans that offer fixed interest rates and locked repayments to help you stay on top of your budget. To find out more about Toyota Access please get in touch with our friendly team and we’ll be happy to discuss your options with you!