When it comes to financing a car, you need to think about a few factors. You cannot just go out and pick your favourite car – you need to think about the cost of the car and then extra costs on top of that. You also need to think about the cost of your financing option. Getting Car Finance can be a stressful time, but here are a few tips to make it easier.
Understand Your Financing Options
There are a few options when it comes to car finance. You can opt for a traditional bank loan or you can opt for a hire purchase. There are also a few other options available when you go through a dealership. Take some time to find out about your different options so you can make the best decision for you.
There are pros and cons to each option. For example, if you take a bank loan, you will own the car so can sell it if you run into financial difficulties. This is not a possibility with a hire purchase. However, if you decide that you do not like the car in the end, you can choose to let the dealership have the car back.
Understand the Different Terms
Whether you have a loan or a hire purchase, there are common terms that you will need to understand. This will help you make the best decision possible when it comes to your car financing options. The most important terms include the “deposit”, “interest” and “term”.
The deposit is the amount that you put down for the car and is very common when it comes to financing through a dealership – this is not something that you will usually find with bank loans. The interest rate is the amount that the lender will add on each year. This is usually given as a percentage and can lead to thousands being added onto your loan. The term is the length of time that you choose to take the loan for.
Understand the Calculation
Before you are pushed into making a decision about your car finance options, you need to understand how the loans are calculated. You can use loan calculators online to get a rough estimate – and this is something that you should do. The calculation is determined by taking the total amount of loan required, minus the deposit. From there, the term is taken into account and the percentage of interested is added on for each year.
This is a long process and the calculators online will make this much easier. The benefit of doing this is that you will know the full amount that you will end up paying and the monthly repayments you will need to make. You can make changes to the term, deposit and the full amount of the loan to be able to change your monthly repayment amounts so that they are manageable.