As your choice car broker service, we offer various financial schemes that help you pay for your car without breaking the bank. We recommend a lot of these financial options while the decision is yours to make. These recommendations are based on your financial situation and needs.
It is possible to buy your car at a cheap or discounted price. Finance is the most popular way to make this possible. While there are different options to choose from, it is advised to choose one particular to your budget, the kind of vehicle you want to buy, and whether you want to own the car out rightly or not.
So, before buying a car, whether used or new, it is important to determine how much you can afford. However if you decide to finance the purchase of your car, there are two available financing options; direct lending and dealership financing.
You can borrow money for your car loan directly from a bank, finance company, lender, or credit union. A loan agreement involves paying a certain amount, plus interest, over a period of time. Once you’re ready to buy a car from a dealer, you can use this loan to pay for the car.
Dealership financing involves buying a car and agreeing to pay for the cost of the car, plus interest, over a period of time. This agreement is always between a dealer and the buyer and can offer convenience, multiple financing options, and special programs.
Before you finance a car, you must shop around and compare the financing options and compare car finance interest rates offered by more than one creditor. You must consider a term that favours getting the required amount and also able to buy the vehicle.
The total amount to repay on a loan always depends on a few things, including;
- The agreed price of the car
- The annual percentage rate, which is influenced by a buyer’s credit score, and is negotiable
- The length of the loan term
Other financing options include hire purchase, a personal contract purchase, personal leasing, or personal loan.
Personal contract purchase
A personal contract plan is offered by car dealerships, and finance brokers. It is a loan mostly for new cars, and some used cars.
In a personal contract purchase, you don’t need to borrow the full price of the car. You only make a 10% deposit of the vehicle’s actual value and then make monthly payments over the course of three to five years period.
The monthly payments will be based on interest rate and how much the car will depreciate.
At the end of the loan term, you can decide to return the car; pay a particular amount to own the car or use the resale value of the car to buy a new one.
Personal contract hire
This is otherwise known as car leasing and can be used to finance new cars, and used cars. It is similar to renting a car.
In a personal contract hire, you pay a deposit, pay an agreed monthly amount, and get use of the car for the duration of the loan term. However, you will be required to pay additional costs for damages done to the car in the course of the loan term.
Most car leasing agreements run for two to five years, and the deposit is normally equivalent to three to six times the monthly payment. The duration of the loan affects the amount to be paid monthly.
The differences between the agreements in a contract hire and contract plan is that you cannot own the car in a contract hire. The car must be returned at the end of the loan term.
Most contract hire type of financing are aimed at businesses.
Hire purchase is a straightforward agreement. A buyer pays a deposit, usually 10% of the car’s value, and then pay off the remaining value of the car, plus interest, in monthly instalments, over a fixed period of time.
In a hire purchase agreement, you do not own the vehicle until the full payment is made. At the end of the loan term, you’re required to pay a certain fee to take ownership of the vehicle.
A personal loan is a borrowed fixed sum paid in fixed monthly payments, with interest, over a period of time. A personal loan term is usually from one to seven years.
Interest rates vary depending on the amount of money borrowed and can be high for small amounts.
Using a cheap loan to buy a car makes you a cash buyer no matter where you’re buying the car from. Personal loans can be secured and unsecured.
Secured loans are usually cheaper but they will be secured on an asset, especially buildings or the vehicle itself. Unsecured loans are usually less risky but more expensive.