Desperately need a car? Buying a car is no simple decision. From buying outright to buying a car on finance, there are many options. You also have to consider running costs. In fact, it’s probably the second most expensive thing after a home. In addition to that, car value is depreciated like crazy over the time. The value of the car drops faster than the ability to repay the loan because it may leave you owing more than the car actually worth. So it is important to make sure you choose the best way to buy a car for you.
If you have sufficient amount of money, you can directly buy a new car in the dealer. When buying the car in this way, making sure that you have sufficient money left ahead for your own saving and operational cost of the car ahead.
Another case when the money is limited we should find the way to finance it. The loan is one of the ways to finance a car when you have a limited budget. Before you do this, it is advisable to examine the reason and purpose why you need a car, then calculate how much car price that you can actually afford. If you finally decided to take a loan to finance your car, figure out how big a loan you should get and how long the loan will be because this will also affect the type of loan.
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Personal Loan
A personal loan can be obtained from a bank, finance provider or building society and it is fairly easy if you have good credit rating. In this case, making sure that the loan is not secured against your home, or otherwise, your home will be at risk if you failed to keep up with repayments. It is recommended that you research and shop around for the best interest rate by comparing the APR (or annual percentage rate, which includes charges you have to pay as well as the interest). In general, personal loans are usually the cheapest way to finance a car deal, but only if you have a good credit rating.
Hire purchase
Hire purchase is a way of buying a car on finance, where the loan is secured against the car. This means until the last payment has been made, the car will not be given. This kind of arrangement usually requires car dealer assistance for it is very convenient. It can be very competitive for new cars but not for the secondhand cars.
Personal contract plan
This type of car finance deal is a variation on hire purchase and tends to result in lower monthly payments. Instead of paying for the car outright, you agree to pay the difference between its sale price and its price for resale back to the dealer. This is based on a forecast of annual mileage over the term of the agreement.
Personal leasing
The arrangement is normally paying the dealer a fixed monthly amount for the use of a car, with servicing and maintenance included. The requirement is the mileage does not exceed a specified limit. At the end of the agreement, you hand the car back. It never belongs to you.
Purchase Pre-owned Car
Consider purchasing factory certified pre-owned cars as your new car. “Certified pre-owned” is another term for for “used.” These cars do come with extra assurances about the car’s condition. Going pre-owned can be a really smart move because most cars lose 18% of their value in their first year. A certified pre-owned car is one that has been inspected and fixed before it goes on the market, and comes with a manufacturer-backed warranty like new cars do.
In general, using your savings is the cheapest option for buying a car, while personal loans are usually the cheapest way to borrow to buy a car, but only if you have a good credit history. If you have a bad credit rating, you might need to choose one of the alternative financing methods to buy a car.
