New Car

Smart Ways of Paying for Your New Car

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It is quite common for those buying cars to spend months agonizing over the selection. Specifications are compared, reviews are read, test drives are taken and car dealerships are visited again and again. Surprisingly the very same folks who may perhaps give a lot of importance to fuel consumption and cost of ownership do not seem to paying a lot of thought to the process of financing the vehicle. They just take up the first auto loan they are offered without paying any thought to the economics of the deal. Over the loan period, a loan taken without shopping can result in a loss of more than just a few hundred dollars. Take a look at the options available.

New Car

Paying By Cash?

Money kept in the savings bank account will not be earning much when the prevailing interest rates are low so it may make sense to dip into your savings to buy the car and not go in for a loan that will invariably cost far more. Even if you do not have the money to cover the entire purchase cost, you can make a large down payment and bring down the loan amount considerably. This will substantially lower your interest accruals. However, you must not liquidate all your savings or you may not be able to find the cash for some unanticipated requirement or an emergency. Even when you have decided that you will pay by cash try and use your credit card. Not only you will enjoy a few extra days of interest in your savings account, but more importantly you will be able to take advantage of the purchase protection facility given on credit card purchases.

Take a Personal Loan

A personal loan from a bank to pay for a car purchase can work out to be pretty effective if you have a good credit score. Make it a point to shop around for the best offers and judge them by the annual percentage rate or APR as it is usually referred to. The APR includes the interest as well as the impact of the charges that may be needed to avail of the personal loan. While personal loans may represent one of the cheapest ways of taking out a loan you should make sure that any collateral required to be furnished by you does not include your home as you will be putting it at risk in case things go wrong with the loan repayment. Do note that personal loans may affect your capacity to borrow till repayment.

Hire Purchase

When you purchase a care on hire purchase, you need to usually make a deposit of 10% and pay the rest in equated monthly installments over a tenure that may extend to 60 months. This sort of financing will usually be offered by new car dealers at extremely competitive rates. However, dealers of pre-used cars may not often offer this facility. You need to take note that the vehicle itself serves as the security and hence the title of the car does not pass to you till such time the full and final payment is made. With the dealer eager to conclude the sale, HP agreements can be quickly executed.

Personal Contract Plan

This is simply another type of a hire purchase agreement but usually has a lower monthly outgo for the owner. Based on the tenure and the expected mileage the car will cover, the difference between the sale and the buyback values form the basis of the loan amount on which, the interest is charged. Usually this works fine with loan tenures of 12-36 months and is extremely convenient as you do not have to worry about selling off the car before buying a new one. You can either pay the resale value and retain the car or hand it back to the dealer and take a new car on another contract. You need to keep the mileage under the contracted figure, else you will be charged extra on a per mile basis on the extra travel. Some personal leases can include the cost of servicing and repairs but are obviously more expensive.

Author bio: A senior sales manager at Ideal Auto USA, Jeremy Caldwell is also the editor of an online magazine for car enthusiasts. He has written a large number of articles on subjects of interest for car owners.




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