The Difference Between Fixed and Variable Finance Rates

Finance has a plethora of industry words and jargon that may send your head spinning faster than a rally race season.
You will hear the phrases ‘fixed’ and ‘variable’ rates discussed in every loan package, therefore it is your account manager’s role to help you understand the advantages or risks that come with the different alternatives that you may be qualified for, to ensure that your finance proposal is tailored to you.

A loan arrangement for your next automobile is similar to a mortgage agreement for a home, and it may be for second hand cars from a dealership or auction, or a private sale, rather than solely brand-new vehicles through franchise dealerships.
We recognise that choosing the proper auto loan package is not always easy, therefore our specialists are here to assist you locate the best solution for your requirements.

Loans with Fixed Interest Rates Explained

Fixed rate loans feature interest rates that remain constant during the loan’s duration and so do not fluctuate with market fluctuations, enabling the borrower to maintain consistent monthly payments.

It is, of course, a popular solution for individuals who want the security of knowing that a certain amount is required each month and that you can manage your other expenses appropriately.
You may then just continue to make the same payments until the agreement expires.

With a Hire Purchase agreement, the vehicle is yours once all of your monthly payments are made; alternatively, you could consider a personal contract purchase agreement, which reduces your monthly payments and gives you the freedom to resolve your outstanding balance in one final balloon payment, or you can give us a call to talk about refinancing the balloon payment within a new arrangement.

Loans with a Variable Interest Rate

A variable rate loan indicates that the monthly payment will move up and down with the market.
Variable rates are dependent on an index, such as the Bank of England’s UK bank rate, which often impacts the interest rates charged by other lenders and financial institutions.

Most lenders will base their interest rates on the bank rate, then add their own margins on top of that.
Your interest rate will be lower if you have an exceptional credit score; nevertheless, a bad credit score can generally result in a higher rate of interest.
Regardless of your credit score, keep in mind that your interest rate may fluctuate to match changes in the bank rate.
As a result, if the bank rate rises by 1%, so will your repayments.

What is the best rate for me?

The answer is dependent on a variety of factors, and choosing on the appropriate sort of interest rate takes thorough study, which our team of specialists can gladly help you with.
Variable rates may seem to be less expensive, but they are subject to change at any moment.
As a result, it is critical to leave adequate room in your budget to account for any adjustments.
A fixed rate, on the other hand, may be a better alternative for you if you like the security of knowing the same amount is owed each month.

So, what happens next?

If you’re in the market for a new automobile, now is the time to check into your financing choices, whether you’ve discovered the right vehicle or not.