The type of financing on a car does entirely depend on the financial status of a person. The factors influencing whether finance on a car is worth it are:
Considering whether car finance is worth it depends on a person’s circumstances. While some people have available cash flow, others do not, and the same with savings. Comparing the interest earned through savings versus the interest paid on a potential car loan will show if using savings will save more or less than the car finance.
Borrowing cash at no or low interest from family to purchase a vehicle may be more cost-effective. Not all are in a position to borrow money from a friend or family. Credit ratings may vary too, dictating the medium of finance to buy a car.
Poor credit ratings
Those with poor credit ratings and no assets may not be able to get the financing needed to buy a car, other than through a guarantor loan. With guarantor loans, another person with a good credit history or assets to secure stand as security for the car loan. Should a person not have access to a guarantor, they may have to wait and build their credit worthiness before purchasing a car.
Others may be able to get an unsecured loan if their credit status is acceptable. Unsecured loans are not tied to an asset as security and generally have higher interest rates and smaller loan principles. Secured loans give greater choice in loan amount, interest rate and duration. Having a secured loan to buy a car may make financing worth it.
The options for financing on a car differ depending on who the car is bought from too. Car dealers offer lease-type agreements, such as the personal contract purchase and hire purchase agreements. The PCP agreement involves payment of an initial deposit followed by monthly repayment amounts over a fixed term according to the lease agreement. Upon the termination of the fixed term, a person may buy the car outright with a lump sum or balloon payment, or simply give the car back.
With PCP agreements there is the option to use the deposit as security for another vehicle. HP agreements may involve an initial deposit payment. The monthly repayments are higher as the car is being paid off monthly for purchase. At the end of the fixed HP term, the car is owned. The HP agreement with higher monthly repayments may not be the best option for financing but may suit those who do not have cash to put down as deposit.
Being financially prepared and comparing financing options available will help a person decide on the best financing route to meet their needs when purchasing a car. You are guaranteed car finance from Car Loan 4U but it may be beneficial to gain professional financial advice through a bank or independent financial practice before getting finance on a car.
Editor’s Note: Craiglist is one of the best sources for buying used cards, checkout our guide on how to get the best deals on Craigslist. Also checkout How to Get a Car Loan with Bad Credit, and since the iPhone 5 just released I feel obligated to mention, How to Get the Best Deal on AT&T.
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