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Your Car Financing Options

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One of the biggest purchases you will ever make in life is buying your own vehicle. Fortunately, there are many options to get one without breaking the bank. If you want to keep your savings where they are, here are some options for financing your brand new automobile.

Personal Loans

You can apply for personal loans from banks, lending institutions, or finance providers, however, it might be hard to qualify without a good credit score.

Pros

  • Can be the most cost-effective option
  • You can bargain for cheaper rates if you have a decent credit rating
  • Can be arranged over-the-phone, online, or through personal meeting

Cons

  • Can affect your other credits
  • There might be a waiting period before the funds will appear

Hire Purchase

With hire purchase, you will pay for regular monthly installments for a period of 12 to 60 months. Hire purchase is arranged by the car dealer, and most often, you might need to secure a 10% deposit. Technically, you don’t own the vehicle until the last payment.

Pros

  • Affordable deposit
  • Flexible repayment terms
  • Quick and easy to arrange
  • Fixed interest rates
  • Loan is secured against the car

Cons

  • You don’t gain ownership of the car until the final payment is made
  • Can be more expensive in the long run

Personal Contract Plan

This type of arrangement is a variation of hire purchase, which may result in lower monthly payments. With personal contract plan, you agree to pay the difference between the vehicle’s sale price and resale price back to the dealer. Payments are spread usually between 12 to 36 months rather than paying for the car outright.

Pros

  • Low deposit and monthly payments
  • Short-term repayment terms
  • Option to trade the car for a new one, pay for the resale price and own it, or return the car to the dealer without paying anything

Cons

  • Mileage limits
  • Need to pay the remaining balance to keep the vehicle
  • Need to maintain the car properly
  • Total payable amount more expensive than hire purchase

Personal Leasing

With personal leasing, you make monthly payments for using the car, including maintenance and servicing fees. It could be cheaper than other options, however, you agree never to exceed a specified mileage limit. The vehicle never belongs to you and you have to hand it back at the end of the contract.

Pros

  • Flexible payment terms
  • Fixed monthly costs
  • No need to worry about the car’s depreciation

Cons

  • You shoulder servicing and maintenance costs
  • Extra charges if you exceed the mileage limit
  • Must put down at least three months deposit
  • You will never own the car

Considerations

No matter which option you choose, there are core considerations you should inspect before making the final choice among this wide range of financing options.

  • Compare interest rates among companies
  • Calculate for the total cost of the loan or finance, including additional charges
  • Make sure you can afford the monthly repayments
  • Make sure you can keep up with the terms, such as mileage limits or early repayment charges.
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