Guaranteed Car Finance: Things to Know

The guaranteed car finance program offers people with credit issues an opportunity to buy a new car. A guaranteed car finance company has a stock of new and used vehicles for sale and can provide financing for a car purchased from a outside the program. The guaranteed car finance program is an innovative way to help subprime borrowers purchase a car.

You should know some things regarding guaranteed car finance programs. How the program works in providing financing for borrowers, the terms of the financing and availability of financing are important to understand. Guaranteed car financing may be the ideal solution for your situation.

Guaranteed car financing works by allowing the borrower to select a car for purchase. The car can be a new or used vehicle that is purchased directly from the financing company or any other car dealer. Guaranteed car financers will not provide loans for vehicle purchases that have been privately arranged.

The finance company requires that certain documents be presented at the time of the loan application such as a driver's license and/or passport, employment and banking information, name and address and verification of residency, and bill paying ability. The verification of the borrower's bill paying ability can be accomplished with a utility bill and a mortgage or rent statement. If the mortgage or rent is in arrears, suitable arrangements must be made prior to entering into the car finance arrangement.

The loan agreement is a contract for hire arrangement where the finance company takes ownership of the vehicle during the loan period. The company charges a monthly rental fee to the borrower in exchange for use of the car. The monthly rental fee is comprised of the loan amount plus an interest and financing charge.

As the loan balance is paid down, it is the responsibility of the borrower to maintain the vehicle in accordance with the terms of the contract for hire. This arrangement works for both the borrower and the lender. The finance company receives a tax deduction in consideration of the value-added tax levied on the vehicle's value while the borrower does not increase his or her net asset value since ownership resides with the finance company.

The program is available in the United Kingdom or to U.K. residents currently. The program is akin to rent-to-own stores in the United States such as Aaron's and Rent-A-Center. These companies specialize in making available furniture and other accessories to individuals with limited credit on a rental financing agreement.

As the rental agreement is paid, through a monthly amount, which constitutes the value of the rented item plus finance charges and fees, the borrower gets closer to owning the property. At any time during the rental period, the borrower may decide to give the property back. If they pay off the rental agreement, ownership interest is passed from the company to the borrower.

Guaranteed car financing, although only available in the U.K., offers some hope to those people with limited options available to secure reasonable financing in order to purchase a car.