Question:

Hi

With the rise of interest rates in recent years, will this affect my car finance?

Answer:

Hi Sarah

This depends entirely on whether you already have finance on a vehicle or if you are looking to get finance in the near future.

- If you already have finance on a vehicle, then the increase will not affect you as the interest rates of car finance are fixed. This means that for the duration of your agreement, your interest rates will not change, meaning your monthly payment will not change.

The only way to make a change to your agreement would be to overpay your finance agreement. This would mean either your monthly payment would be reduced or your term shortened, but this will be subject to your finance company’s discretion.

- If you are currently looking to finance a car in the near future, then the rate could change. The reason for this is the base interest rate is set by a central bank which, in our case, is the Bank of England.

This affects the amount the Bank of England will charge to loan money to the other banks, such as NatWest, HSBC etc. The banks respond to this by charging more to the finance companies to cover the difference which, in turn, raises interest rates for the customer in this instance.

Please be aware that this interest rate alone does not determine the interest rate you receive. There are other factors which are taken into consideration which determine the interest rate you will receive when applying for finance such as your credit profile.

finance manager
This question was answered by

Sasha McCormack

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