Buying a new car is a huge investment and most of the time it is difficult for the average person to raise the full amount to buy the vehicle in cash. However, there are a couple of options for getting financing that you can choose from including:
Taking out a personal loan
Personal loans are one of the simplest ways to get financing to buy a car. The great thing about personal loans is that they take into account your personal income and financial status when coming up with the best loan terms. You can even spread your repayments into as many as seven years if you want to make smaller regular payments.
The personal loan can be secured or unsecured depending on the type of loan it is. With secured loans, you need to give the lender collateral as a guarantee for the amount of money you borrow. Secured loans usually have lower interest rates than unsecured loans.
Car loans are special types of personal loans where the vehicle that you are buying is the security for the loan. In case you fail to make your payments, the lender can repossess the vehicle and sell it off to clear the remaining loan amount. You can use car loans for as much as 100% financing to purchase the vehicle. There are some eligibility criteria for the vehicle that you are buying to be used as a security by the lender:
- New cars are preferably expected to be brand new and purchased from a dealer. They usually attract a lower interest rate.
- If you are buying a used car, it should be a certified pre-owned car.
- You can also get a car loan for partial financing if you had saved up part of the total cost of the vehicle through secured loan minimums. This is referred to as borrowing a specific amount and not the vehicle purchase price.
You can also use your credit card to buy your vehicle on credit, especially when you want to borrow an amount lower than the loan minimums for most lenders. This is often the case when you need just a few extra bucks to pay off the vehicle but you do not want to get into a loan commitment.
If you are not sure whether you want to keep the vehicle permanently or you only need to use it for a short period of time, then getting a car lease is the best option. A car lease is like renting the vehicle for a period and you have the option of buying it after the rental period is over.
The great thing about leasing a car is you do not have to pay the full purchase price of the vehicle after the leasing duration is complete because the payments you have made will be taken to account.
Car leasing is great for employees whose employers offer a salary package for getting a car through Novated leases. This also applies to businesses that do not want to tie up their capital in owning an asset that depreciates in value.