How to Finance the Purchase of a Car

The purchase of a car is certainly not a simple decision to make. Such a purchase involves a huge expenditure. A car is usually your second most expensive asset after a house. The finance option you choose for buying a car would have an impact on your economic condition and the way you would spend in the near future. So, it is important to look at all the financing options carefully and select the best one. Let us have a look at the different financing options available.

Go for the Best Interest Rate When Looking for Car Finance Options

Savings or Cash:

When the rate of interest is low, your savings are likely not to earn much in banks or building society accounts. So, instead of keeping the savings and borrow at higher interest rates, it is better to utilize your savings for fund a portion of or the entire car price. To use your savings for funding the car, keep in mind the following:

  • Ensure that you own enough savings to be used ion case of an emergency, after you make all, the payments for the car.
  • If the savings you have are not sufficient to purchase the vehicle outright, go for using them for making the biggest possible deposit.
  • Even if you are employing your savings, it is better to make the purchase using your credit card, owing to the protection offered by purchasing through credit card.

Personal Loan:

If your credit rating is good, personal loans can prove to be the cheapest way for financing a car purchase.  Personal loan can be obtained from finance providers, building societies and banks. Never go for securing the loan against your house. This would prevent you from being put at risk if you fail to make the repayments. Do research to find the best rate of interest by comparing the different APRs (Annual Percentage Rate).

Going for personal loan offers several benefits. A personal loan can be arranged face-to-face, over the internet or over phone. It may cover the entire cost ion the vehicle. If you look around, you can find a suitable rate of interest. However, in some cases, there may be some delay in the appearance of funds. So, go for lenders who offer funds almost immediately. Personal loans are a good option to go for even when you make the purchase of a used car from Online Car Auctions.

Hire Purchase:

Hire purchase requires to be paid in installments and the payments here can be made in timeframes ranging from 12 to 60 months. Usually, the buyer needs to make a deposit of 10%. They are mostly arranged by car dealers. Since the car is used to secure the loan, the buyer is able to own the vehicle only after making the last payment, not before that.

The arrangement of Hire Purchase is easy and quick. The deposit is quite low, about 10%. The repayment terms are quite flexible, ranging from 12 months to 60 months. The interest rates are fixed and quite competitive. However, it is relatively expensive for agreements of short-term.

Conclusion:

Financing the purchase of a car can be quite easy and simple, provided you do thorough research to find out the options and a suitable interest rate. There are several financing options available from which you can choose the one that suits best to your requirements and economic condition.