Car Finance Options What You Need To Know
For most people a car is a substantial purchase, substantial enough for it to be more than worthwhile to take the time to look at the different options for financing the purchase. Here is a quick run-down of your options.
Standard Personal Loan
There is a huge market for personal loans, although the sweetest deals are likely to be reserved for those who can put down a deposit. The reason why financial institutions ask the purpose of the loan is essentially to give them an idea of how easy it will be to recoup their money in the event of a default. Car loans are looked on relatively favourably in this regard; however purchasers need to be aware that in the event of a default any assets they own could be at risk.
Hire Purchase agreements require a deposit followed by monthly payments and a final transfer fee for the purchaser to take full legal ownership of the car. Until the agreement is fulfilled, the car remains the property of the financing company and can not legally be sold on unless the debtor first buys their way out of the remaining agreement. There may be a penalty for doing so, as the finance company will not receive the anticipated interest. In the event of a default, only the car can be seized.
Personal Contract Purchase
This works in much the same way as hire purchase until the end of the agreement. At that point, the purchaser can choose whether or not to keep the car. If they do wish to keep the car, they will need to make a final transfer payment in the same way as for a hire purchase agreement. If they do not wish to keep it, they can either simply return it and owe nothing, unless the condition of the car has been subject to damage during the period of use, for example excessive mileage. This means that PCP is only really suitable for people who are confident of their mileage requirements. In the event of a default, only the car can be seized.
The reason why dealer finance tends to be perceived as an expensive option is because dealers just love buyers who put all their effort into getting a great deal on a car and dont understand that unless they stay on guard right up to the end of the process, theyll wind up paying it all back and more with a poor financing option.
Do your reading beforehand and know what the market rates are. Remember that everything in a car sales transaction is negotiable. When negotiating with a car dealer it is important to be clear that you want the car and want to reach an agreement if at all possible, but that you can still walk away if need be.
Remember to budget for your other needs
In particular you will need to buy appropriate insurance, as a minimum you will need third-party insurance, and it can also be well worth your while to visit the direct gap website to take out specialist gap insurance with any car purchase.