After the purchase of a home, your car is the second most expensive investment you’ll ever make. Whether you choose to purchase a new or a used vehicle, it’s important to do plenty of research before committing yourself to monthly payments. The guide below will help you work through what your options are and how they can benefit you.
What Are Your Options For Buying A Car?
From the initial planning phases of deciding whether to purchase or lease to the actual financing available to you, this guide can serve as a great starting point!
The best way to purchase any car is to use cash, for some or all of the asking price. Of course, very few people have the adequate funds to outright purchase a vehicle, which is why financing is so crucial. Regardless of your needs, there are many financing options available for you to choose from, there is even poor credit car finance and it can feel daunting at times having to make a decision.
Before committing to purchase a new or a used vehicle, consider what your financing options are by checking them out below!
*PCP Or Personal Contract Purchase
With this option, you have the ability to replace your old vehicle for a new one every couple of years. When opting for this kind of financing, you will need to make an initial deposit of anywhere from 10 to 20 percent of the car’s perceived value. You pay off your debt through monthly installments and make one last balloon or lump sum payment in order to own the vehicle.
If you prefer not to make the last balloon payment, you can actually trade in your vehicle for a new one at the dealership. You also have the option of privately selling your car through another marketplace in order to eliminate your last balloon payment. These options are ideal if you can’t make your last payment to outright own the car.
There are quite a few advantages to opting to purchase a car with this method, including:
-A low initial deposit.
-Lower monthly payments.
-Flexible repayment plans.
-End of financing options you can control.
A hire purchase contract will require an initial down payment of anywhere from 10 to 20 percent. You pay off your debt in monthly installments that also include interest rates until your payment terms are completely cleared. After your final payment, you will outright own the vehicle.
The downside with this option is that your financing company has the option of repossessing your car if you miss any payments. Though you do have to account for monthly interest rates, you also eliminate the final balloon payment when your contract terms expire.
There are a number of possible advantages to opting for this method of financing, including:
-A low initial deposit.
-Easier to get approved for than other options.
-Flexible repayment terms.
-Competitive interest rates offered based on the dealership.
-You outright own the vehicle after making the last payment.
*Personal Contract Hire Leasing
When you sign a lease agreement, you only lease the car and never end up owning it. That means after your terms are up, you will need to hand the car back to the dealer. Usually, leasing requires no initial deposit, but you still make monthly payment installments that also include the servicing and maintenance of the car.
Whether this option is worth it for you to explore ultimately depends on the dealership and what the offered terms are. In some instances, leasing is significantly more expensive than opting to own a car. On the other hand, you have more flexibility and options when it comes to providers due to the maintenance and upkeep of your vehicle.
There are a number of benefits of choosing to go with this option, including:
-Fixed monthly installments.
-Maintenance and service costs are included.
-No need to concern yourself with the Kelley Blue Book value of the vehicle.
-Flexible payment term options.
-You can change providers as needed.
You can choose to use a personal loan regardless of opting for a new or a used car. Usually, personal loans are offered by banks, lending services or private lenders.
Before even considering this option, it’s important to do your homework well. Take into consideration the length of time and the amount you will need to borrow. Then, you will need to calculate how much you can afford to pay back in installments comfortably while also accounting for interest rates.
Personal loans carry a number of advantages including:
-You are likely to get approved if you have good credit.
-You select how much money you need to borrow.
-Shopping around will get you better interest rates.
-You can find your ideal lending company by doing your homework.
*Bad Credit Financing Options
There are a great number of ways that you can get financed in order to purchase a vehicle for your household. However, you may find your options are slightly more limited if you have bad or no credit. Though having a lower credit score doesn’t necessarily mean not getting financed, it does mean less desirable financing terms and fewer lenders to strike a deal with.
Fortunately, here are a few ways you can work to improve your situation:
-Make your bill payments on time.
-Check your credit report for discrepancies and pay off smaller debts.
-Avoid getting too many loans or credit cards at once.