Do you need a car right away but with no available funds at your disposal? Need to figure out a way to obtain your hands on a set of wheels? Luckily, that’s what car loans are for. They offer to pay for the car you need now and have you pay them back through a period of time.
However, before you sign the first contract shoved under your nose, there are some things you need to know. For instance, is that loan good for your current financial standing? Can you afford the monthly payments and are you sure you’re not in over your head?
To avoid those circumstances, you need to know the difference between various loans offered in the market today. Here are some of these types of car loans:
A standard loan refers to borrowing money from facilities like banks, credit unions or any other organisation. They can provide you with enough money to buy either a used or a brand new car.
This is the best choice to make if you have a great financial standing. The only disadvantage is that they also come with higher interest rates. But if you are on time with your payments and find the time to take care of your car really, it will all be worth it.
Some jobs offer a car as part of their benefits. In return, they will take out a portion of your salary to compensate for it. That’s what we call a novated lease. A novated lease is a three-way agreement between you, your employer, and the vehicle provider.
A downside to this is that you will shoulder all the operating costs including rego, insurance, and maintenance.
A finance lease is best suited for those who don’t qualify for a standard loan. Finance lease companies will offer you a car, typically around two to three years old, and have you lease it from them within three to four years.
You will need to pay a standard monthly fee for your vehicle and often, you will be given a choice to either upgrade or buy the car from the dealer by the end of your term.
Commercial hire purchase
This refers to when a financier purchases a car and then rents it out to another person over a set period of time. The renter must then pay the loan used on the vehicle for a fixed period of time, not unlike that of a car lease. Once they have paid off the last cent, the car is now theirs to keep. An affordable and accessible way for you to get a car of your own.
A chattel mortgage refers to when a financier advances money and then holds a mortgage over the car as a security for the loan. What you, as the consumer, can do is finance the car’s total purchase price, make upfront deposits, or even use a trade in. There is also a chance that you will be required to pay an extra payment.
The financier buys the car and lets you rent it. This is what the operating lease basically means. From the outset, it is eerily similar to a financial contract. Their only difference is that the car will remain in the financier’s name instead of getting it named to the renter.
Here, the buyer won’t have to worry about the vehicle’s maintenance and among other things, and they will also have the option of buying the car or upgrading to a new one by the end of the term. Alpha Car Finance offers this service.
Now that you have a better idea of the types of car loans you can get, make an educated choice on which one you should get. Choose carefully and don’t forget to make the monthly payments on time to avoid your debts building up and causing you trouble.