Buying a car outright can be almost impossible for many of us. We don’t all have thousands in the bank, ready to splash on a brand new vehicle. Luckily, you no longer need to buy your car in full anymore. There is now an option known as finance, whereby you pay smaller amounts of money each month for your car.
Whether you’re getting a finance BMW, Ford, or SUV, the principles are the same. You will be required to pay a small deposit when you first get the car, and this is followed by a series of regular monthly payments.
Most finance contracts are 24 months long. Over the course of two years, you will pay a similar amount of money as you would have paid initially if you’d have bought the vehicle outright. However, the option of finance makes the costs much easier to manage.
When you sign a contract for a finance agreement, you are effectively making a credit agreement. The vehicle owner is lending you the car and you leasing it for the duration of the contract.
Failure to meet your monthly payments will lead to you losing the car and being removed from the contract. You may also need to pay extra fees for your late or missing payments.
What Are the Finance Options?
There are a few different options when you are getting a vehicle on finance.
Personal Loan
The first option and the most popular is a personal loan. This involves borrowing money from a lender, such as a bank, to provide the funds for your car.
If you’re borrowing money from the bank, you might be able to buy the vehicle outright. However, you can use your car loans to make monthly repayments on a finance plan. If so, keep in mind that the longer it takes you to repay your loan, the more interest you will accrue.
Hire Purchase (HP)
The next option is Hire Purchase, which requires you to pay a deposit and then follow up with fixed monthly repayments.
The vehicle is owned by the company to whom you are making the monthly payments and you are hiring it for the duration of the contract. When your contract finishes, you become the new owner of the car.
Leasing
Leasing a car is similar to renting it out. It’s also very similar to the Hire Purchase method in terms of making fixed monthly repayments for a set amount of time. The difference between leasing and Hire Purchase is that you aren’t offered the option to purchase the car at the end of the contract.
Leasing is a great option if you like to change your car regularly but don’t want to spend the money buying the vehicle outright. It’s also ideal if you don’t have the funds to buy your dream car.
ABOUT STEVEN NOVAK
Steven is a certified mechanic and technical writer. Steven is excited about off-road trucks, camping and car modifications.
Every year he visits SEMA, and other car shows. He knows everything about wheels. tires and is always ready to help our readers.
