Considering black box car finance but can’t separate fact from fiction? Don’t panic; our car finance myth buster, Verity Hogan, is on the case
1. It’s the same as black box car insurance
If you’re confused, we get it.
Yes, they have virtually the same name, but black box car insurance and black box car finance are two very different things.
Black box car finance is all about your payments, not your parallel parking skills.
Once the black box has been installed, you’ll get a reminder every time your monthly payment is due.
A few days before you need to pay, the box will be activated. Different boxes can do different things, but most have a light that will turn red and start flashing. Once you’ve made your payment, it’ll either reset automatically or you’ll need to enter an activation code given by the lender.
2. It monitors how carefully you drive
While we’re not saying you shouldn’t drive carefully, how hard you brake and how fast you go around corners won’t be monitored with black box car finance (that’s only the case with insurance).
In fact, your black box won’t track your driving skills at all! Its only job is to alert you when your monthly repayment is due and (safely) immobilise your car if you fail to pay on time.
3. It stops your car while you’re moving
While the black box in this type of car finance deal is designed to prevent you from driving if you don’t make your payments, it won’t happen instantly. You’ll usually have a grace period of up to 30 days before your car is deactivated.
That’s one of drivers’ biggest fears; you’re driving down the motorway at 70mph, three miles away from the nearest service station, when suddenly your car comes to an abrupt stop. Not only are you stranded, but you could also end up in a serious accident.
Happily, that scenario won’t happen with black box car finance. They may be small, but black boxes are surprisingly smart. The in-built technology is linked to the lender via GPRS, so it can work out when your car is safely at a standstill, sitting on your driveway, before it activates the immobiliser.
4. It can negatively impact your credit score
One of the big reasons why you might choose black box car finance as a young driver is that it can help people with poor credit scores – or no credit history at all – to buy a car. As you can’t start building a credit score until you turn 18, it can be harder for young drivers to find it more difficult to find finance. But it’s not impossible.
When you haven’t had any credit before, lenders can’t be sure how you’ll act as a borrower. It doesn’t matter whether you’re great at managing money or not – it’s the fear of the unknown.
The black box gives lenders reassurance. When you’re at risk of losing the use of your new wheels by skipping repayments, you’re much more likely to make them on time. In fact, some studies have found that it can reduce missed payments by up to 50%.
So, while your credit score might dip initially when your finance is approved – you’re taking out a large new loan after all – if you make all your repayments, black box car finance could improve your credit score over time.
5. It can be used with any type of finance
While black box car finance is becoming more common, it’s still not as well-known as other types of finance like guarantor and joint loans. One big reason for that is that it’s not available with every type of finance.
Black box car finance is usually only available with Hire Purchase (HP) agreements. Sometimes known as Pay As You Go car finance, it will typically ask you to put a deposit down upfront. You’ll then make fixed monthly payments throughout your loan term until all the payments are made and you become the car’s legal owner.
The loan is secured against your car, meaning you won’t be able to sell it or make any modifications until all your payments are made. A small Option to Purchase admin fee will also apply.
