There are several major decisions you will have to make in your lifetime, and one of them is buying a car. It’s not an easy decision to make either, considering the different options available. Aside from that, you’ll also have to consider the running costs. Overall, buying a car can be the second most expensive decision you make after buying a home, which is why it’s important that you know what buying option is suitable to you.
The most cost-effective way to purchase a car is to buy in cash, or at least part of it. When you buy in cash, you won’t have to pay interest. Before you consider this option, though, you have to make sure you have enough savings left on your emergency fund after. If you don’t have enough money to pay for the car in full, make sure you consider giving the biggest amount possible for your down payment. If you have a credit card, you might also want to consider using it to purchase the car, so you can take advantage of the purchase protection. Just see to it that you pay the bill off next month and in full.
Another option for buying a car is through personal loan. This will only work if you have good credit rating. You can get it from a finance provider, a building society, and of course, a bank. Do not secure the loan against your home or you will be putting it at risk of being taken if you fail to keep up with payments. Before choosing an institution, shop around first to find out which has the better interest rate. The only downside of this option is that it might take a while for the funds to be available. Also, if you are borrowing money for other transactions, that, too, might be affected.
With hire purchase, you can buy a car, but the loan is secured against it. This means you will only have full rights to the vehicle once you have fully paid for it at the end of the term. Hire purchase agreements are usually arranged by car dealers themselves. They also require lower down payments and flexible repayment terms. However, they tend to be more expensive if you opt for short-term agreements.
Chattel mortgage is very similar to hire purchase. The only difference is that with chattel mortgage, the buyer takes title in the vehicle, which is the chattel, from the time of the purchase. He then finances the car by way of loan and applies them as payment to the chattel provider. Keep in mind, though, that with a chattel mortgage, you have to be using the car for income producing purposes, or you won’t be allowed to avail yourself of it. You can also take a look into commercial vehicle leasing for more details on this.
Also known as car leasing, personal leasing works with you paying a dealer of your choice a fixed monthly amount in order to use a car. This is a good option if you currently don’t have the cash to buy a new car or if its price range is not within your capacity to pay. The advantage of personal leasing is that the amount you pay is inclusive of the car’s service and maintenance. However, it may not be a good option if you drive a lot or if you do not have time to keep your car well kept both inside and outside. You may incur penalties if you drive beyond the limit stated in your agreement, or if you return the car with damages on either the exterior or the interior.