Cars, whether you love them or hate them, are pretty essential for modern day life. However, choosing to buy one isn’t something that can be taken lightly. You not only have to think of the cost of the car, but also how kind it’s going to be to your finances after the fact. To help you out, here are some of the options for financing a car, and some of the details surrounding them.
First of all, paying through savings. This is probably the most conventional and safe way of purchasing a car. Unless your interest rate is something special, your savings aren’t going to be bringing in much income. Rather than holding onto these and borrowing at a higher rate, use them to cover the cost of your car. Although this usually turns out better than other methods, be careful. Make sure you’ll have enough savings left over to save yourself from a financial emergency. If you can’t do this, or can only cover some of the cost, then you might be better off using a credit card. This way, you’ll have a little more wiggling room through the card’ purchase protection.
If your credit rating is good, enough, then you may be able to get it through a personal lease. This entails a fixed monthly amount, which covers maintenance and servicing. That is, provided you don’t exceed a specific mileage limit. Whether you’re able to eventually buy the car or not varies. The good points here are that you have a fixed monthly cost, with no nasty surprises. The payment terms are usually fairly flexible too. Next, here’s what that smiling, silver-tongued Mercedes dealer didn’t tell you. There’ll usually be a deposit required; typically, 3 months’ rental. Because servicing and maintenance are included in the payment plan, the costs can end up being pretty high. Furthermore, in many cases, the car will never end up as permanently yours.
The final option I’ll suggest is a personal loan. I’ll only recommend this when you absolutely need a car. Again, securing a personal loan hinges on your credit rating. You can get these from a bank, building society, or another creditor. Most of these are “unsecured” loans. However, double and triple check this fact. If the loan is secured against your home, and you don’t keep up with payments, then it can be repossessed quite easily. There’ll probably be a lot of options available for a personal loan, so take some time shopping around. The representative APR is a good way to judge each loan. Be careful proceeding with this if you’re already in debt. Taking out another loan may affect the conditions of this other debt. Sometimes, it can take a while for the funds to actually appear in your account too. If you’re desperate for your new vehicle, avoid these!
Financing a car can sometimes feel stressful, but it’s something almost anyone can do. Other options, like personal contract plans and hire purchases, might be better suited to you. Before any big decision, make sure you scour the market thoroughly.