As financial pressures ease across the world, finance is on the increase with £31.6 billion in finance in the U.K. and $565 billion in the U.S. While there is the option to save for a new car, the newer, pricier models are sometimes out of reach. A simple way to solve this is through vehicle finance. Here’s how to get the most out of that car loan.
Decide Whether Lease, Installment Sale, or Car Loan Suits Your Needs
There are a number of different options and choosing the best one depends on the situation.
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Lease Agreement/Hire Purchase: this option is suitable for those who wish to pay the smallest installments possible and have the option to change their vehicles at the end of the period. This is a good option for those who do a lot of traveling, such as sales reps. At the end of the term, the customer has the option to purchase the vehicle for a predetermined lump sum. The car acts as security for the loan.
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Installment Agreement: In this option, the installments are a little higher but at the end of the period, the car belongs to the customer. The car still acts as security for the loan.
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Car Loan: This option has the characteristics of a personal loan, but just has a different name. The car doesn’t act as security for the loan.
Not all these options are available at all financial institutions or credit providers, which means customers are required to shop around for the best deal.
Choose A Term That Suits Both Short and Long Term Budgets
Although it might be tempting to go with the 84-month term, it does also mean that the interest paid over the period is significantly more. The rule of thumb is to choose a vehicle where you can afford paying the installments over a three-year period. Even if it means closing a few accounts or using consolidation loans to free up cash flow. SoFi, Prosper, and Payoff reviews provide some insight into companies that provide these services. This ensures that the finance is affordable and that the insurance burden is not as high.
Ask For A Quote
Not for the car, but for the contract. Finance companies often try to reel in their customers with the promise of paying the lowest interest rates. What consumers often don’t look out for, are the other monthly charges and fees that tend to creep into the contracts, inflating the installments. It’s best to compare apples with apples, and in this case, the pre-contract quote.
It might be tempting to go with the first financial institution that approves the loan, but a little bit of comparison will go a long way. Finding the right finance deal means a stress-free period in which to pay it off, as the installments fit comfortably into the budget.
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