Vehicle finance appears to be a complex term for many and those without much experience might think hard before entering into what they might perceive to be deep waters. However, it could be simplified with the basic understanding of the process.
The theory is simple: you want to purchase a car, and you are looking through the options of financing it either with the available amount of money or loans (which are in various forms). You might be buying a used car or a brand new one, and for each one of them the amount may differ and so would the payment plan.
How do I finance My Purchase?
One of the fundamental questions anyone who is new to the business will be asking about the options available to acquire the car of their dreams:
1) Cash Payment
One of the basic methods of financing your car is to pay the entire amount with the cash available. This is the ideal scenario where you don’t have to be a part of the loan hassle. However, the ideal scenario doesn’t occur every now and then. It is also important to keep in mind the emergency fund has to be kept safe when you are planning to purchase a vehicle with your savings.
2) Personal Contract Purchase
Personal Contract Purchase has gained popularity over the current times and very justly so, for it provides amazing deals for the buyers on easy terms to acquire the vehicles they want. This is unique for it provides splendid options benefiting the vehicle consumer. One is that you pay off the debt over a period of approximately three years after paying the initial deposit. This way you have the chance to make a balloon payment to pay off the remaining amount and get the ownership of the car. The other option is that you can hand over the car to the dealer; this way you have paid a rent for keeping the car for the given time period. You can also exchange it for a new one and there would be another cycle of personal contract purchase.
3) Personal Loans
Personal loans are the most sought after options when it comes to acquiring finance to purchase a vehicle. You apply for a loan in a financial institution such as a bank and once the terms and payment plan etc are all discussed the loan is sanctioned for the vehicle.
4) Dealership Finance
Under this method, your vehicle’s ownership lies with the dealer and is handed over to you once you’ve made all the payments. The payment plan and the interest rates etc are all to be negotiated with the dealer and you sign once you’re satisfied with the plan. This way your car is the collateral against the loan.
How do I get to the best of finance deals?
It is essential to keep the basic considerations in mind so to not be mugged in the name of vehicle finance.
1) Keep in mind the total cost
While some of the financing options may offer you a low monthly payment, the long term cost would be a lot more than you would have thought. It is better to calculate it for the long term and then go for the most feasible options.
2) Don’t Settle
No one can force you to settle for a plan so don’t. If you don’t think the financing option your friends have recommended, suits your own financial status, browse through other option. It is always advisable to go through the market for the best of deals.
It is also important to know the interest rates and the market trends before signing up for a vehicle finance deal.