Despite over three quarters of cars being sold with some form of finance attached, research shows that few people fully understand what they are signing up to. At FairSquare, we hope to help you get a better understanding of the details, benefits and risks of all car finance products available to you. We also recommend you do as much research as you can before you choose a finance product.
Selecting the right way to pay for your car is just as important as choosing the car itself.
It makes sense to calculate what you can really afford each month on a car, not forgetting you need to factor in all the running costs such as insurance, car tax and maintenance.
Affordability is the key criteria all lenders use to evaluate if they should make you a finance offer. You may well be asked by a lender to provide proof of income and outgoings to secure your car finance, depending on your credit rating. Most people – and the car industry in general – tend to focus almost entirely on the monthly payment. However, you should pay much more attention to the full implications of entering into a finance agreement, considering a complete breakdown of all the potential charges during and at the end of the agreement, taking time to consider the suitability of that product to your needs.
Understanding a Fixed Sum Credit
- A Fixed Sum Credit is a finance contract, which is unsecured
- You get immediate ownership of the car from the beginning, the credit amount is paid directly by your finance provider to FairSquare
- Ideal for those who like to budget an exact repayment amount each month
- It gives you the flexibility to change your car whenever you wish to do so
- You can usually make over-payments and early payments on your credit, giving you flexibility
How a Fixed Sum Credit works
You can either borrow an amount equal to the full purchase price of the car, or put a deposit towards the car purchase price and take a credit to cover the balance.
Your first monthly installment is usually taken one month after the credit is granted.
Most contracts are set up over either 24, 36, 48 or 60 months.
£7500 over 5 years
3.1%APR representative example
£134.97 per month
Total credit charge = £598.20
Total repayable = £8098.20
Fixed Sum Credit Key Facts:
- Can be used to finance both new and used cars
- Spreads cost of car in fixed equal monthly installments
- You get ownership of the car immediately
- You can sell the car during the agreement term
- Unlike PCP you are not limited to an annual mileage or other conditions (such as fair wear and tear)
- If you wish to settle your agreement early, you can do so by contacting the lender and pay the amount in full or in part at any time
What happens if my circumstances change?
If your circumstances change, we recommend you contact your lender immediately (keep records of all correspondence) and talk to them about the options available to you. This may involve restructuring your agreement in some way, to help you with the repayment of your debt. We can assist you with lender correspondence, should your circumstances change.
If you fail to make payments, the lender can enforce the agreement, which may involve applying to the court to be awarded a court judgment against you for the balance due to include default fees, costs and interest.
The lender will also report your default to a credit reference agency. Your default will be recorded on your credit file and can be viewed by other lenders and agency users who search your credit file. This may make it difficult for you and other members of your household to obtain credit in the future.
Voluntary Termination rights do not apply to Fixed Sum Credit but you can settle the credit at any time.