What to look out for in your car finance agreement

With any finance product, it’s all-important to scrutinise the ‘small print’ before signing on the dotted line. After all, it could be the finer details that largely impact on whether the given car finance deal is the right one for you.

So, it’s not just ‘headline’ factors like the APR and the total cost of your car finance that you’ll need to consider. That’s because you should also keep a lookout for the following terms on your car finance contract.

How far you will be able to drive

Here at CarFinanceGenie, we mainly focus on two types of car finance: hire purchase (HP) and personal contract purchase (PCP).

These two forms of car finance have a lot in common – including fixed monthly payments and the fact that they are loans secured against the car. But one key difference is that a hire purchase agreement comes with no mileage restrictions, whereas PCP deals do typically include such limits.

So, it’s really crucial to check whether your car finance agreement stipulates that you can only drive up to a certain number of miles each year. Also look at what charges will be imposed if you exceed your limit.

This part of the contract could make a massive difference to the suitability of your car finance deal, if the number of miles you usually drive each year is significantly above the level the finance agreement allows, or if your annual mileage is likely to surpass this amount in the future.

Consider, then, what your mileage needs are likely to be over the term of your PCP agreement. Are there certain likely practical factors that could cause your mileage requirements to exceed the permitted amount, such as a house move or change in workday commute?

The car condition requirements

Some car finance agreements can also be quite strict when it comes to the condition you’ll be required to keep the car in. That might mean initial charges are incurred if the vehicle sustains what the car finance provider considers to be excessive wear and tear and damage.

It’s therefore important to scrutinise exactly what your car finance agreement says about preserving the vehicle in a certain condition. You might be required to comply with general car maintenance guidelines, or to have the car serviced regularly. The agreement may also request that you either avoid major bumps or scrapes, or at least have them fixed if the car does sustain any.

Make sure you know exactly what is meant by any such terms in your car finance agreement, and ask for clarifications if necessary – such as written examples of what the lender would regard as excessive wear and tear and damage.

Also look at exactly what charges will be imposed if you don’t keep the car in good condition. If you’ve had accidents in the past that make you nervous about this requirement, or if you fear you might lack the time to maintain the vehicle to the expected level, you might have good reason to rethink this particular car finance deal.

The listed charges

We’ve already covered some of the charges that can come with a car finance deal, and you should always carefully look over any prospective agreement to ensure you’ve accounted for all possible fees.

Some car finance agreements, for example, include an ‘option to purchase’ fee once the loan term is over, which might be quite important if you intend to eventually acquire the car permanently.

The payment schedule

It may seem almost too obvious to mention, but all too many people taking out car finance don’t take a proper look first at exactly when their monthly payments will be taken, and how much those payments will be.

One common practice by responsible borrowers is to arrange for the payment to come out of their bank account shortly after they’re paid each month. This would save you from having to worry about your car finance payments until the following month’s installment.

Bear in mind that it may be harder to alter the payment schedule on your car finance agreement once it has taken effect. It’s therefore well worth checking this aspect of your agreement before committing to anything, so that you can request any necessary changes right at the start – and in the process, help ensure you don’t miss any repayments.

Alert yourself in advance about the need to keep a lookout for the above things in your car finance agreement, and you can be better prepared and more confident of it being the right deal for you.

Apply for car finance in Essex through CarFinanceGenie today, and you can expect to be presented with highly competitive deals for automotive finance, as part of our straightforward and hassle-free service.