Learn about best options to finance your car.
Deciding which car finance method to choose from when purchasing or leasing your new car can be confusing. This is made worse by the excitement of getting a new car and experiencing the “new car feeling”. The last thing you want is to spoil that feeling with finance details as an anti climax. However the fact remains that most of us can’t or wouldn’t want to use cash to pay for our new car, finance is required. What are your options when it comes to buying or leasing your new car? What factors should shape your decision? This article will try to shed some light on these issues.
What options are there? There are many options from which to choose from. In this article we will discuss three of them. Our first one is an often misunderstood method of enjoying the use of a car, a personal lease.
A Personal Lease is a very flexible personal finance option. The monthly payments are low as only the interest on the car is paid. These payments can be tax deductable as they are categorized as a rental not a purchase. The car you lease can also we bought at a discount in the future. Personal leases are good for clients who accept the burden of paying a monthly payment for the privilege of constantly having a new or next to new vehicle.
A Car Loan is a great option to buy a car. It is highly flexible as it can have long tenures of up to seven years while the monthly payments can be very low. The loan is secured against the car so the interest rates can be lower because the collateral reduces the risk of the loan. The only issue is that the car is not completely yours until you have made the last payment. It also limits your rights over the sale of the car. Car loans are good options especially for large car finance loans that require some flexible payments.
A Personal Loan is a loan that has no collateral except the word of the borrower. Typically personal loans are shorter and with higher interest rates as the loan is not secured with any tangible assets. The maximum tenure tends to remain between two and three years. The lack of collateral allows you to act and behave as the owner of the car, selling it at any moment. Having this flexibility will allow you to get better prices on the sale of the car if not on the loan.
Which option should you choose? It all depends on the type of car you want or need and the kind of credit rating to justify the loan.
So choose wisely which option you choose will determine a few of the consequences these finance products have on us. So happy hunting, keep on learning and enjoy your next car.