Car financing can be sometimes difficult and with research showing that most car owners decide on how to pay for their car before paying a visit to a forecourt, it is important to appropriately address the issue of car financing and more importantly, car finance deals. Some of the reasons identified for not going through the normal procedure for choosing a car finance deal include high interest rate and poor reputation of motor trade.
Intending car owners have six ways of financing their car purchase. One of the options is using a credit card. The major drawback to this option is the high interest rates attached to the option, making it a preferred option for a short-term measure.
Taking a personal loan is one of the most popular ways of paying for a vehicle. This option is quite simple as it involves taking out a loan either with a bank or any other financial institution. These loans can be easily arranged over the phone and the rates are usually competitive.
People with a mortgage and consequently have an existing lender can also borrow money from a mortgage provider, with the option of either getting a second mortgage or withdrawing equity from the house. The major benefits of this option are the relatively lower interest rates and having to deal with a familiar lender.
While the options of taking out a personal loan, mortgage top-ups, and using your credit card are some of the most popular methods of financing a car purchase, there are three other options that you can use in financing your car purchase. The options are hire purchase or conditional sale, personal contract purchase, and personal leasing.
Hire-purchase of conditional sale option is where you have an agreement with the car dealer on the amount you intend to borrow in order to get the car. The dealer subsequently contacts the Motor Finance Company and pays on your behalf. The agreement stipulates that you make monthly payments to the dealer and you only get full ownership of the car when you complete the payment. The advantages of this option include lower interest rates and flexible payment terms.
The Personal Contract Purchase option is for car purchases that have the price range slightly beyond your budget. There is the option of deferring the cost until the end of the payment agreement, with the option to trade-in the car, pay the outstanding amount, or hand the car back to the dealer available to you. This option is great to purchase a car that would otherwise have been too expensive for you.
The final car finance option is to rent the car. This option is also known as Personal contract hire or personal leasing. Here, there is a rent agreement between you and the dealer, stipulating the terms of the rent which would include the duration of the rent and the cost of maintaining the car. This option is best for persons that only want to use the car for a period of time as it removes the stress of having to buy or sell the car.
Intending car owners can contact their dealer or agent on the best deal for them before going ahead to choose a particular car finance deal.