Car finance is something that many people go after. There are many different options available to you but the question is: which one is right for you? You need to take the time to search the different options and consider them all before applying for one of them.
Financing a Car with a Loan
This is usually the first option that people take. This is because it offers the fewest risks and is usually the easiest to obtain. Loans are unsecured up to a certain amount – usually £10,000. You then have somewhere between three and 10 years to pay that money back. This offers you the best chance to make affordable monthly repayments without having to worry too much about losing your car.
However, there are downsides to loans. Because they usually come from banks or private lenders, not everyone is able to get hold of one. There are credit checks and the banks are now less likely to loan to someone who has a bad rating. At the same time, the banks are also less likely to loan to someone who is not in full time, stable employment. You should ask your provider all the questions before making an application.
Financing a Car with a Hire Purchase
This is an option available to most people, including those with bad credit and those who are in part time or self employment. The hire purchase is something that is taken out through the dealership and it gives you the ability to make monthly payments towards a car, without having to buy it outright in the end. You do not need to make the final payment – depending on the contract that you sign.
However, there are downsides to this option. The interest rates are usually high, due to who the dealerships allow to finance. Another downside is that the car is not yours until you make the final payment. The clue is in the word “hire” in the title. You are hiring the car until you pay for the full amount, so the dealership can repossess the car at any point if you fail to make the monthly payments.
Leasing a Car
Not bothered about owning your own car? Just want to drive the latest model for a few months to a year? You can do this by taking a lease out on a car. This is more beneficial than a hire purchase if you are just wanting to try out a car. The benefit is that you will not have to offer a deposit for the lease. The interest rates are usually much lower and you will not need to pay as much in the long run, which often means that your monthly payments are also much lower.
However, the main downside is that the car is not yours. If there is an accident, it will be up to you to repair for the damage – whether that is through your insurance or the insurance of the party at fault. You will also need to make payments for any maintenance that is required on the car afterwards and you are usually restricted to the mileage that you are allowed to do.
There are many options when it comes to car finance and the three above are just three options. Take your time to consider everything available to you and work out which one is best for your needs.