Unless you are
in a financially fortunate position, it is likely that you will need some form
of car finance to purchase your next vehicle. However, when it comes to
personal car finance, many consumers can become a little overwhelmed by their
options. With the terminology involved and different terms or interest rates,
it can be a little challenging to determine which the best choice is for you.
This brief guide aims to showcase your options to help you have all the facts
you need to make an informed decision.
Car Loans:
The most
obvious choice for your car finance is a loan. Loans are available through high
street lenders, dealerships and brokers. While your first instinct may be to
opt for the dealership loan package or seek out your high street bank, this may
not be the best option. The terms and interests for car loans can vary greatly
and unless you have a perfect credit history, you are unlikely to be offered
the most attractive deal from these institutions. However, a broker can help
you to check all the available deals on the market. Brokers often specialise in
offering finance packages for those with a less than perfect credit history.
This means that you can obtain a very attractive deal. However, be sure to
check the interest rate and charges involved before you agree to a deal.
Car Leasing:
Leasing is a
form of car finance,
Perth business owners may be familiar with, but in recent years leasing has
become more common for private customers. Leasing involves paying a rental fee
for each month to use the vehicle but the ownership of the vehicle remains with
the leasing company. The lease is typically set for a predetermined period
between one to three years, after which the vehicle is handed back to the
leasing company. This type of arrangement can often be attractive for those
looking to drive a new car, which they may not be able to afford to purchase.
While leasing is often a less costly option, you should be aware that the
depreciation of the vehicle is factored into the lease cost and there are often
restrictions such as limitations on the distance allowed on the odometer
written into the contract. This can mean that if you drive too many kilometers,
you may end up paying a hefty penalty.
Personal Loans:
Another method
of financing a new vehicle is to use personal loans. These types of loans can
be unsecured or secured on an asset such as your home. This option is often
seen as attractive as you can secure the funds you need and have the money
available when you begin car shopping. While many of these loan deals may
appear very attractive, you should consider carefully the terms. Often this
type of personal loan is offered over a longer term. This means that while the
interest rate may be one or two percent cheaper, you will still pay far more in
interest over the total loan term.
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