When you need to buy a new car, you have to consider some of the auto finance options available to you. There are various options available, and choosing the most appropriate one for your needs can be a bit challenging. Below is an overview of some of the leading auto finance options to help you get through the maze.
Personal Contract Hire/Car Leasing
With this car finance option, it is essential that you first understand the car leasing agreement. Essentially, you will only be paying for the depreciation of the car during the period that you will be using it. You start by paying out a specified initial amount and follow it up with monthly payments for a duration that you will agree upon with the dealer. You will have to return the car after the expiry of the contract.
Leasing brokers usually have access to many competing lenders. That means that they can get you the best possible deal on the car that you desire. The high competition among dealers and a wide variety of options that is facilitated by brokers result in car leasing having the best rates when compared to other financing options. It is also a very cost-effective option given that you only pay for the depreciation of the car.
Personal Contract Purchase
Personal contract purchase is commonly advertised in showrooms. Similar to car leasing, you will have to pay a fixed initial deposit and follow it up with monthly payments. The main difference is that you will have three options at the end of the agreement. The first option is returning the car to the dealer and walking away. For the second option, you can purchase the vehicle by paying a balloon payment that is decided upon before signing the contract. With the third option, you use the surplus value of the car in another deal for your next vehicle.
Hire purchase is a great option if you intend to have outright ownership of your car after the finance agreement. You get to make monthly payments that chip away the overall cost of purchasing the vehicle, and by the time you complete the payments, it will be yours. The car will be considered hired to you until the time that you complete the payments.
Taking out a loan for a car is a simple way to purchase your car right from the start. You will even be able to sell the car if you wish to, even before you complete paying off the loan. You will also not be tied to estimated values, condition of the vehicle, or mileages.