How new car finance normally works.Although there will be a handful of people who can afford to buy a car outright, the majority of us require new car finance in order to seal a deal. However, some people who are buying for the first time may not fully understand how car loans work, and may have difficulty choosing between the multitude of options which are on the market.
Although there will be a handful of people who can afford to buy a car outright, the majority of us require new car finance in order to seal a deal. However, some people who are buying for the first time may not fully understand how car loans work, and may have difficulty choosing between the multitude of options which are on the market.
Essentially finance is a way of funding the purchase of a car which you are buying either from a private seller or from an official dealership. There are all sorts of quirks with regards to interest, payment periods, deposits, and methods of repayment.
Many people who decide to buy a car from a private seller, perhaps through a specialist motoring website listing, or a newspaper advert, may decide to go with the personal loan option.
This involves applying for your own loan with an interest rate which is affordable and involves a repayment schedule which may be anything from 12 months to four years. Typically the downside to a longer repayment period is a higher interest rate - although for some people this may be a small price to pay for keeping the monthly cost down over a long period.
The other hand, if you're buying from an official dealership, you may decide to take out a new car finance car loan independently or alternatively go for the hire purchase agreement which may be offered by the dealership. Hire purchase, often simply known as HP, is a loan direct from the dealer, which may involve a deposit and then paying off the rest over a set length of time.
One of the downsides to this is that until the final payment is made the car is not technically yours, and the dealer typically reserves the right to repossess the vehicle if you don't keep up with repayments.
Whatever you decide it may be of benefit to arrange your new car finance before you make an offer to a private seller - they may be more inclined to close a deal quickly and may simply offer the vehicle to someone else if they fear they will have to wait a while for you to get a loan in place before paying.
Posted by Edwin Miles on