Purchasing a new vehicle is an exciting prospect. There are several options available to you in order to secure funding for your new automobile and make the dream a reality. When it comes to car financing, you do not have to go into the dealer without a prepared plan.
Hire purchase is another term for working with the dealer to arrange a loan for your new car. It is by far the most common method to pay for a vehicle. By using your credit score, your dealer works with their network of lenders to obtain arrangements for you. The car is the collateral for the note and it is not actually yours until you fulfill the loan terms. Usually, you are required to put some money down for this type of agreement, but not always. The interest rate is always fixed and very competitive. You can also get flexible term limits that range from 12 to 60 months.
Most people do not consider this option, as the cost of automobiles is expensive. However, if you have the money for a vehicle on hand you may consider paying for it out right instead of going through the car financing process. You can sometimes get a better price and you will not have to pay interest. However, you need to make sure you do not wipe out your entire savings in order to purchase it in case of an emergency.
Instead of going through the dealer, you can go get a loan on your own from a bank or other lending institution. You will have to have a good credit rating and payment history to qualify. In addition, you will need to put something up as a collateral most of the time. If you plan to go this route, you should probably not consider putting your house up as the collateral, as a missed payment may cost you your home. You may also need to wait a period to get the money before you can purchase your vehicle. However, you do get the option to shop around for the best interest rate.
While most car financing options are designed so that you can own the automobile, some people decide that leasing the vehicle is in their best interest. With a lease, you make a monthly payment but the vehicle is never actually yours. Of course, that means you do not have to worry about depreciation. However, there are limits to this type of loan. You must keep the car in good repair, which is usually included in the fees. You will also have a limited number of miles that you can drive each year. If you exceed that number, you will have to pay a penalty. The deposit is also higher, being the equivalent of around 3 months’ worth of payments.
For those who do not qualify for a loan, a buy here/pay here type service may be your best bet. These lots self-finance the vehicle and allow you to make monthly payments based on your salary instead of solely your credit score.