7 questions to ask before you sign any car finance deal

Most people agree to car finance the same way. They find a car they like, someone hands them a set of figures, and they say yes because the monthly payment sounds manageable and everyone in the room seems to be waiting. It is not a great way to spend several thousand pounds.

The fix is not becoming a finance expert. It is knowing which questions to ask, because the answers tell you quickly whether you are dealing with someone straight or someone hoping you will not look too closely.

Here are seven. Take them to any broker or dealer, including us. Our answers are under each one so you can see what a straight answer sounds like.

Ask this first, because it costs you nothing and it tells you a lot. A soft search is a quiet look at your credit file. You see the result, other lenders do not see that you looked, and it leaves no mark. A hard search is recorded and visible to anyone who looks afterwards.

The difference matters more than people realise. A single application will not do much damage, but several hard searches in a short space of time can, because lenders may read repeated applications as a sign of financial difficulty.

You should never have to risk a mark on your file just to find out whether something is worth applying for.

Ours is a soft search. It takes about 60 seconds and has no impact on your credit score.

A lender has one set of criteria. If you do not fit them, the conversation ends there, and nobody tells you which other lender might have said yes.

A broker works with a panel and looks for the one that suits you. The size and range of that panel is the whole thing, because a broker with three lenders is not offering much more choice than a lender with one.

Here is the honest caveat, and we say the same thing in our own guide to car finance myths. Brokers are not automatically the cheapest route. Brokers, dealers and banks all give you access to different lenders and rates, and no single route wins for every driver every time. Get quotes from more than one source.

While you are at it, be wary of anyone advertising guaranteed approval. No legitimate lender can guarantee a decision before looking at your circumstances.

We are a credit broker, not a lender. Our panel includes lenders who specialise in customers with a less than perfect credit history. Acceptance is never guaranteed, because the final decision always sits with the lender.

Slightly awkward to ask, which is exactly why it is worth asking.

Brokers are usually paid commission by the lender. That is normal, legal and disclosed. What you want to know is whether they will tell you plainly when asked, because someone who gets cagey about their own payment structure is unlikely to be clearer about yours.

We receive a commission for introducing you to lenders we work with. It is either a fixed payment or a percentage, and it can vary by partner, but it does not affect the rate you are offered. Full information is available on request.

The monthly payment is the number everyone leads with because it is the smallest one available. £199 a month sounds reasonable. But for how long? Twelve months, or sixty? Two deals with identical monthly payments can differ by thousands over the full term, depending on the length and the rate.

Ask for the total amount payable. Ask what the APR is. On PCP, ask about the balloon payment, which is the large final sum due if you want to keep the car, and start budgeting for it from day one rather than discovering it three years in.

Do not assume a headline 0% deal wins either. Those offers are often attached to a higher cash price for the car, so you can end up paying more overall than if you had negotiated a discount and accepted a small rate elsewhere. If someone will only talk in monthly figures, that is a signal.

Our calculator shows the total repayable alongside the monthly figure, because the monthly number on its own never tells you whether a deal is good value.

Nobody enjoys this question and everyone should ask it.

Usually yes. Most agreements let you clear the balance ahead of schedule, and doing so normally reduces the total interest you pay. Some include an early settlement fee, which should be capped and disclosed up front, so check your specific terms rather than assuming.

Often yes, and this is the right most people have never heard of. Under the Consumer Credit Act, PCP and HP customers can end the agreement through Voluntary Termination once they have paid 50% of the total amount payable, deposit included. It is sometimes called the half rule. The car needs to be in reasonable condition and it does not apply to every agreement type, so check yours.

Also ask what happens if you go over a mileage limit or miss a payment, and get the answer in writing.

You are agreeing to something that will run for years. It is reasonable to know how it ends, including the ways it might end badly.

Worth asking on the forecourt as much as anywhere. There is nothing wrong with a dealer having stock they want to move. It becomes a problem when the car and the finance are bundled so tightly that you cannot tell which decision you are making.

Take them separately. Work out what you can comfortably afford first, then choose the car. Being offered finance for a more expensive car is not the same as being able to run one, once you add in:

Popularity can mislead you too. In our analysis of 5,000 customer vehicle records, Ford was the most common make at 12.50% and the Nissan Qashqai J11 the most common model generation at 4.17%. BMW, Mercedes and Audi together took 22.33%, so premium is well within reach on the used market. Just remember that a lower purchase price does not mean lower running costs.

If reliability is the priority, these are the ones that keep coming up:

We give you a pre-approval up front so you know your budget before you start looking at cars, and you can choose from any reputable dealer.

Ask before you sign rather than after.

Is there a person or a form? What are the hours? Is the company authorised and regulated by the Financial Conduct Authority, and can they give you their firm reference number? That last one takes a minute to check on the FCA register and tells you whether you have any protection at all.

One more thing on this. If you have been declined before, do not assume that is the end of it. Different lenders have different criteria, and one decline does not mean every lender will say no. It is worth researching your options before reapplying rather than firing off applications, for the hard search reasons in question one.

And when you do apply, be accurate. There is no point making an application look better than your situation is. It catches up with you, and it tends to produce an agreement that does not actually fit.

carloans 365 is based in Sale, Greater Manchester, and we are authorised and regulated by the FCA under reference 821383. We are here 365 days a year, which is where the name comes from.