A Guide to Car Financing

Are you looking to buy a car on finance?  Well, you are not alone? Many of the car owners you see today have been on this route. The highest percentage of vehicles in the UK today are/were funded through financing, all thanks to the wide range of loans offered at irresistible interest rates. 

While these types of financing/loans make it possible for you to get your hands on a car you otherwise couldn’t afford, you still need to be careful with whatever deal the dealer is offering.  You need to be sure that this is the most affordable and best deal you can get before signing it. 

Which Is The Most Appropriate Finance Deal

Car finance companies will have several different financing options for their clients. Most of the offers will be appealing to you, while others are only ideal in specific situations. A number of factors, however, have to be considered before deciding on the best financing option. Some of the factors to consider include: 

1.Where You Wish To Buy The Car

Some finance deals are only available or offered by dealerships and manufacturers on their stock or the vehicles they have to offer. These include personal contract purchase (PCP), hire purchase (personal contract hire), and leasing. These types of financing are mostly applicable and ideal when looking to buy a new car. Some dealerships may also consider used-cars to ensure a vehicle sells. You can also choose to buy a car through a dealer even when they don’t offer any form of credit. This option is, however, only viable through some sort of a personal loan.

2.Are You Looking To Own The Car

Buying the car outright, through a personal loan, makes you the legal owner. You, however, need to evaluate your options to see if you wish to own the car or need it for some time. If car ownership is what you dream of, then this is the best option to go with. 

Leasing a car allows you to use the car (as if it were yours) for a specified period of time. Most dealerships will allow you to rent the car for several years, say 3 years, and even allow you to buy it off after the lease time has expired.  Hire purchase, on the other hand, means you get to pay a specified amount every month in installments for a set period. It is until you have made the last payment that you get to be the rightful owner of the car. 

Personal contract purchase, on the other hand, allows you to make a lump sum once the term is over, that is, if looking to own the car. This financing option also means you simply have to hand the vehicle back and walk away once the term is over, or choose a new PCP loan for a different car.

3.Have You Saved Some Money (Deposit) For The Car

A lump sum in the form of deposit is required should you choose to go the PCP, hire purchase, and lease way. A number of factors will, however, influence the deposit amount, one of the reasons experts recommend researching more on a deal before signing it. You can however take a loan to help buy the car in full, then start servicing the loan itself. Your credit rating will also determine how much a lender will be willing to lend you.

4.Consider Your Budget

Always take into consideration what you can afford when considering car financing.  You can use the Car Finance calculator to get an idea of how much the loan will be, the initial deposit, and monthly repayments.  You can then use the data provided to see what you can afford and how you’d juggle other aspects of your life.  You could also choose different loan periods to improve their affordability. 

5.Choosing Long-Term Loans

While short-term loans seem enticing, they can really strain your income, one of the reasons it would be advisable to go for long-term loans. This is particularly recommended if dealing with limited income but still need the car. Extending the loan, to say five years, will make it more affordable and manageable. This, however, means you get to pay more in interest within an extended period. Car finance comparison is the best way to take a look at all options available and make the right decision for you.

Your credit score will, of course, play a crucial role in determining the type of financing you can afford. Be sure to check your credit report ahead of time, and look for ways to make it better to attract better financing options and at lower interest rates too. Make sure your credit report is free of errors before applying for a loan or car financing.

For further information please click here: https://www.morisoninsurance.ca/auto-insurance/