Car Finance Options
There are many different ways to go if you are looking at car finance options, and you can choose one that works for you by reading this article and understanding more about these various options.
When you look at your car finance options, keep in mind that what is right for one person may not be right for another. You will need to base your decision on your own financial situation.
Car finance options:
Here is a list of the most common car finance choices available. Take a look through them to find the best way to pay for your new vehicle.
Car loan
When you get a car loan, the car that you are planning to buy is actually used as security for the loan. It is basically the same thing as a secured personal loan. If you can’t meet all of your loan obligations for payments, the lender has the right to seize your car. Usually the interest rates are lower on this kind of loan since it has been secured.
There is a certain criteria that must be met for the car to be considered eligible as security. Some of these are:
- Used cars need to be younger than seven years old for many lenders, and the loan amount minimum may also be a consideration.
- New cars must be purchased only from a dealer and be brand-new. Loans for new cars usually have interest rates that are lower.
- Secured loan minimums, which means the amount borrowed and not the purchase price of the car, can be between $4000 and $10,000 for any car loans.
You may still qualify for a car loan if you do not meet all the criteria, you just need to check first before applying for one.
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Personal loan
When you take out a personal loan to purchase a car you will borrow money that you will need to repay with regular payments. You can spread these repayments out and will be given between one and seven years to pay it back. Your repayments will be smaller if you make the term longer. If you use a personal loan for car finance you will not be able to use this credit to make other purchases and you usually cannot redraw the money that you’ve already repaid even if you have repaid the minimum required and then some.
Depending on the lender, most personal loans vary from $1000-$10,000. Some lenders do offer unlimited loan amounts, while others cap them at $25,000.
You can either get a secured or unsecured personal loan to use as car finance, and this will influence both the interest-rate and how much you are allowed to borrow.
Credit card
This can be a good option if you have a low interest rate credit card, or if you want to purchase a car that does not meet the minimum loan requirements.
Lease on a car
Getting a lease for your car finance is a lot like renting, but you will be given an option to buy it when the lease has expired for a residual. A residual is a percentage or value that has already been agreed upon when the car was first purchased.
Chattel mortgage
This finance option is good for businesses where the chattel, (the car), is used more than 50% of the time for business. This allows the business to claim the car for benefits that are tax eligible.
Hire purchase
Sometimes this is also called commercial hire purchase where the car is purchased by the financier, and you hire a car from them for a specified amount. This option for car finance is usually done for business purposes.
There are a lot of different car finance options to choose from, and you should research them carefully before making your final choice.
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