A whole host of car finance options are available at dealerships and each method has both advantages and drawbacks. Whether you’re a first time buyer or veteran car owner, it’s important to know the extent of what’s out there to aid your acquisition of a new vehicle. Which finance option would work out best for you depends on your personal finance preferences, individual situation, and what you’re comfortable doing. From personal contracts and leasing to hire purchase and 0% finance, several methods of financing your investment in a new vehicle are available. We’ll cover the basics of each, who the type of finance is good for, the amount it could potentially cost, and any possible drawbacks.
Personal contract plans are one of four main ways that people use to finance the purchase of a new vehicle. You place a deposit on the vehicle that you like and pay installments monthly until the end of the predetermined contract term. When the contract term ends, you have three options available to you. You could pay the price set by the company financing your purchase, the deferred cost and guaranteed minimum worth of your vehicle, and claim the car as your own. You can sell on the vehicle to another buyer and use that to fund the final sum, or you can give the car back to the dealership. If the car is worth more than initially predicted by the finance company, you’ll get the option to use the difference to pay for a deposit on a new car that you’d like instead.
Personal contracts offer more protection than personal loans that are unsecured. These contracts are particularly good for people who like low repayment amounts and like changing cars approximately every couple of years. They typically cost 7-14% APR.
Leasing is an option for those who aren’t ready to commit fully to the purchase of a vehicle. Financial Investment advice will help you to determine whether you fall into this category. You don’t have the hassle of owning the vehicle, and monthly payments vary between manageable sums of $100-$500 per month. Annual mileage, length of lease and type of vehicle play a part in how much your monthly payments will cost. A nice addition to some leases is the ability to include maintenance payments. However, comprehensive insurance to cover damages can rocket the cost of a lease. More information on the differences between leasing and buying can be found on Which?.
Hire purchase finance is one of the simplest forms of finance to use and understand, so it’s a good option for first time buyers. The typical cost is 7-13% APR and the monthly installments will follow an initial deposit that is at least 10% of the price of the vehicle. Admin fees are usually taken with the first payment and fees relating to the purchase of the hire vehicle will be taken with the last payment. Anything in-between is a standard, pre-arranged payment amount that doesn’t change on a month-to-month basis.
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