Categories: Tips & Insights For Car Buying
Should You Use a Car Finance Broker? Pros and Cons
Owning a car has become a basic need these days. The big problem is that there are millions of people out there who can’t make to pay cash to get a car. They have to explore other financing methods to get the car. However, financing a car through a financial institution like a bank or credit union can be a problem, especially when you have a bad credit score.
That’s why people turn to a car finance broker to help solve the problem. In most cases, these professionals do solve the problem for prospective car owners. So, who are finance brokers, what do they do, and why should you or should you not seek their help?
What is the work of a car finance broker?
In simple terms, a car finance broker is the individual or company that links prospective car owners with loan lenders and helps in striking the deal. They work with you to find an auto loan that suits your budget, needs, and set of features. The lender has the assurance of the broker that the borrower is in a position to repay the car loan.
A car finance broker becomes an asset, especially in the current economy where a lot of people are in the bad credit zone, and banks are shying away from loaning them anything. While most mainstream lenders rely on your past credit history to decide on whether to give you a car loan, a broker relies on your current economic situation to advise on the best deals to take and also approaches the lender on your behalf.
Some car finance brokers might charge a service fee, which is usually included as part of the loan. This can be expressed as a comparison rate, and most charges associated with the loan are expressed as percentages. Other brokers might not charge a fee for their services since they usually get commissions from the lender for choosing their products.
The pros of using a car finance broker
As you would expect, engaging the services of a good car finance broker has its perks. There are a number of gains you can make in this regard:
They help save time
If car finance brokers didn’t exist, you would have to go around knocking on numerous doors looking for lenders, most of whom would likely turn you down. Fortunately, a car finance broker is someone who has already established a network of trusted lenders with whom they can link you up quickly and hassle-free.
As a matter of fact, people are busy these days. You don’t want to waste days or even weeks trying to find a car loan lender when you could talk to a car finance broker who knows them.
You get the best rates and terms
A genuine car finance broker assesses your situation and recommends the best rates and flexible payment periods that don’t hurt your pocket. If you were to do it on your own, you would have to spend a lot of time (probably weeks or even months) gathering information about various car loan lenders and comparing them all to find the best deals.
If you get a broker, they can take you directly to the appropriate lender with zero time wasted. You want to deal with a professional who knows their business. Any genuine car finance broker is your guy for that. Also, you don’t want to venture into a field that you don’t know much about and probably end up getting scammed by unscrupulous lenders or impostors. A knowledgeable professional will save you that headache.
They can help improve your credit score
Most people go to car finance brokers because they can’t get loans directly from lenders like banks because of their bad credit scores. However, car finance brokers don’t look at your past credit or your past involvement with lenders like banks or credit unions. Instead, they look at your current economic situation and assess whether you’re capable of repaying a car loan of a specific amount.
Once they’re confident in your ability to repay, the car finance broker approaches the lenders on your behalf. Lenders trust the car finance broker, which means that lenders now trust you. This is helpful to your credit score. The best part about this is that both the lenders and the car finance broker are accredited and trusted by the financial system. If they favor you, the entire system starts regarding you well, too.
You get more options to choose from
Since the finance brokers know a lot of lenders, they are exposed to many options. This gives them an edge when delivering tailored solutions to their customers. That means that you, as the customer, will have a wide range of options to choose from. These could be in terms of different payment periods, interest rates, payment premiums, grace periods (if any), terms about repairs and accidents, and much more.
This way, it’s easy for you to decide to settle on the deal that best suits your interests and financial situation. Another good thing is that your genuine car finance broker helps you decide by using their own experience in the business. If there are suspicious loopholes in the agreements, they spot them and advise you accordingly.
It’s mostly free service
Most car finance brokers don’t take money from those looking to buy cars. They take their commission from the car sellers and lenders. As such, your engagement with a car finance broker is free of charge. They help you with filling out forms and applications for loans and all other technical steps needed for you to get a car on loan.
This begs the question: Why would you not want to use a free service to ease the process of getting a car loan? A lot of people opt to contact a car finance broker for this reason.
The cons of using a car finance broker
Just like any other economic sector, the car and loaning industry is infested by a few bad apples that threaten to spoil the name of the entire lot. Here are a few drawbacks of using a car finance broker when buying a vehicle.
Some brokers can get greedy
The fact is that every lender has a different commission that they offer to brokers who bring business their way. Commissions cannot be uniform for all lenders. That’s why you must be careful in dealing with some greedy brokers who are just after the commission instead of helping you bag a good deal.
A greedy car finance broker might even mislead a customer just to get them to take a loan from a particular lender that gives them the highest commission. That’s bad business for the customer. In some cases, the broker hides some facts about the deal to be signed, leaving the car owner stranded with expensive loans and hidden charges that are borderline extortion.
Some may charge a service fee
If you don’t have money and you’re going out there looking for a car finance broker that charges service fees, that’s bad business for you. While you may want to try your luck by finding the lenders by yourself, that may not be the best option. The best option is to ditch the broker charging fees and find one that doesn’t.
Some people don’t know that there are car finance brokers who don’t charge fees. These people take the pains to find lenders and engage with them directly. Sometimes it works, and sometimes it doesn’t.
Working with a car finance broker can be a great way to get a good deal on an auto loan with minimal risk or work on your behalf. It’s a fact that genuine car finance brokers help a lot of people get affordable auto loans without much struggling and stressing over credit scores and time. While there are a few bad actors in the industry, the majority are good and trustworthy.