Here are five of the most common questions we get from Armed Forces finance applicants, and answers in brief.
Overseas postings can be disruptive to your financial life. One of the questions we are often asked is what do I do if I am mid-way through my agreement, get posted abroad, and no longer need the car?
If you are ranked above CPL, married and in quarters, over 30, based in the UK, and have a good credit history, you probably don’t need to use a broker.
Car dealers, especially new car dealers, are under significant pressure often to firstly sell cars, but also to keep registering new cars. This means that they can often have very attractive finance offers, and often these are subsidised by the profit from the sale of the car to show very low APR figures. This means that the dealer actually pays the finance company in some cases to provide a very low APR figure to encourage you to buy a new car, and the money to do this either comes from the profit of the car, or the manufacturer will pay this money as a bonus payment to the finance company or dealer, to compensate them for this cost.
For a long time there have been two camps in the Armed Forces as far as mainstream financial services are concerned. In our experience this issue does appear to affect the Army more acutely than the other services, but the RAF and Navy are far from excluded from the issue.
Yes is the short answer.
Lots of our customers apply from Germany or other countries to purchase vehicles. You can usually take the vehicle back as well, although in some places this isn’t practical for obvious reasons. It is quite common for people to contact us from abroad, and prepare everything remotely so when they return on leave, or for good, they can collect their new car when they land.
NERP status stands for New Entrant Rate of Pay.
If you look at your payslip, you will see a section about three lines down, in the middle, and it will say Or Main/NERP of 7, or it will say Or Main/02 for example. If your payslip says NERP you are still considered a new entrant, or trainee if you like, if it says 02 for example, that means you are on pay grade 2 of 7 and you are a fully employed member of the forces.
Yes it can, but it doesn’t need to.
If you go abroad for a period, when you return there can be a sort of black hole in your credit history as you have not been here, and this can potentially lower your credit score and make it harder for you to obtain finance when you return. But it doesn’t need to be this way.
Firstly, you very much should bother. Number one, it’s free so you have nothing to lose, number two, one of the biggest reasons we see people either being declined for finance, or being offered a higher rate of interest for finance, is small items of adverse credit the applicant is unaware of, or active information at multiple simultaneous addresses.
When you join the forces, it can feel as though you are penalised by the banks and credit providers for choosing the job you have. You are certainly not alone, particularly if you are not in married quarters, and aged under 30 years old, in feeling that it is almost pointless applying for finance. Also, the rumour around the base is that military applications are frowned upon and very difficult to get approved so things can feel stacked against you.
So, the question is, do finance companies routinely avoid armed forces?
You may have heard of people handing cars back to finance companies, or doing what is called a Voluntary Termination. This is where you are able to return the vehicle to the company that financed the car and not make any further payments. Yes it does exist, yes it is legal, and no, it does not really damage your credit report if you do it, but there are some rules to follow.
The problem that we see a lot with applications
When you join the forces you may be among the majority of people who move to service accommodation at a barracks address. Often this will be a second address for you as you will likely stay off-base on weekends, perhaps at a nearby rented address with your partner or at your previous home address. If you then use these multiple addresses for your finances, and are registered on the voters roll at one or more of them, it may have a negative effect on your credit profile.
What is a credit score, and how does it work?
Someone in the finance industry mentioned the phrase ‘Credit Score’ about 20 years ago, and most of the country has been obsessed with it since.
Credit scores are a points based system that usually go from 0-600 or 0-999, the higher the number, the better credit risk you are, and that number is based on factors such as whether you have had credit in the past and paid it, whether you are on the voters roll, and whether you have got any current active credit profiles etc, etc.
Neither. The two are different. To simplify the choice we will split them into two parts, PCP and HP.
PCP or Personal Contract Plan
Imagine a cake, split into roughly three parts. The first piece, is your deposit, which you need to pay up front. Schemes vary, but usually this is between 10% and 35% of the price of the car. You need to pay this at the beginning as a down payment on the car. The third piece is what the car is expected to be worth at the end of the agreement. It is usually called a GFV (Guaranteed Future Value), and it is the amount that the lender or manufacturer will guarantee the vehicle is worth at the end of the agreement, usually about 30% of the original value of the car depending on your declared mileage usage. After piece one, your deposit, and piece three, the GFV, have been removed, you are left with piece two, around 40% of the value of the car. This is the bit you finance.