If you need to finance a new car, there are many options available. You don’t want to choose a certain method of financing before you have reviewed your choices in depth. The fact is that buying a car is not a simple decision by any means, so you shouldn’t rush into it. The more thought you put behind this decision, the better your chances will be of getting a great deal. Those who take the time to do their research end up in the best possible situation for the short-term and long-term.
Using a Personal Loan
A lot of people who buy new cars use a personal loan to finance this major purchase. There are advantages and disadvantages to doing this, and it’s important to consider them before making a choice.
One of the best things about using a person loan to buy a car is that it can be done in-person or online. These days getting a personal loan through the internet is a fast and simple process. If you are approved for one of these loans, you will likely get enough money to cover the full cost of the vehicle. Another good reason to think about getting a personal loan is that you can get a great fixed interest rate.
Some people choose not to take out a person loan when buying a car because there are cheaper options available. The monthly costs associated with a personal loan can be considerable when compared to other types of financing. It’s also important to consider that you might have to wait a while before you get your funds.
Hire purchase offers a very effective way to finance a car. This financing option requires making a minimum deposit of 10%, so you will need to keep that in mind. The loan is secured with the car acting as collateral. This means that if you are unable to pay back the loan on time, the lender will take possession of the car for good.
You will find that hire purchase is very quick and can be arranged without any hassle. If you are in a hurry to get a car, this is an excellent option to look into. The deposit requirement is typically low, so you don’t have to spend very much upfront if you don’t want to. There are usually some pretty flexible payment plans you can take advantage of as well. The interest rates tend to be fairly competitive, so you shouldn’t have any issues getting a good overall deal.
There aren’t a lot of drawbacks associated with using hire purchase to finance a car, but you won’t actually own the car until you make the last payment. If you want a short-term arrangement, this option might be a little bit too expensive. Hire purchase is typically better for those who want a long-term arrangement.
Personal Contract Purchase
Personal Contract Purchase or PCP is yet another financing option that you should be aware of. Most people who finance cars this way end up with low monthly payments, making the loans easier to pay off. The catch to this option is that you will end up spending more on your loan in the long term.
If you are worried about not paying back your loan on time because of high monthly payments, PCP is the way to go. Once the term ends you will be able to trade in the car and start a new term. You can also give the car back to the dealer without having to pay anything at all. If you want to keep the vehicle, you can make a balloon payment.
The low monthly payments that are associated with PCP financing deals make them very popular with a lot of people. You also don’t have to worry about needing to give a large down payment. The repayment terms for these loans are usually very flexible, which is also nice. You will have numerous choices at the end of the term.
There are some potential drawbacks to PCP financing that you should consider. If you exceed the mileage limit with your vehicle, you will incur extra charges. You will also need to pay extra if you get any scratches or marks on the vehicle. This is usually a more expensive financing option than hire purchase, but the monthly payments are lower.
Leasing is a very popular option that you should take the time to look into. This involves paying a dealer a set amount each month to use the car you want. Maintenance and servicing will be included in the deal, provided you don’t go over the mileage limit. When the agreement comes to an end, you simply give the car back.
You should keep in mind that leasing costs more on a monthly basis than PCP, but there is more flexibility when it comes to switching providers. There is also a good chance that you will end up paying less in the long term. Lease terms typically go from 12 to 36 months, so you can decide which option works best for you.
One of the biggest drawbacks of leasing a car is that the monthly costs tend to be higher, and you never actually own the car. This is a good option for those who don’t care about ever owning the vehicle and want to save money in the long run.
Which Financing Option Should I choose?
The financing option you choose when buying a car will depend on your own personal preferences. Some of these types of financing will have you pay less in the short-term but more in the long-term, and vice versa with others. It is important that you take the time to explore each of these options until you are able to make a choice that meets all of your needs. You definitely don’t want to rush into selecting a certain financing option, because you’ll almost certainly regret it.