Car Finance - Know Your Options

Is it the time to buy a new vehicle? When looking to upgrade your current model of car - maybe because your current run-around...

Is it the time to buy a new vehicle? When looking to upgrade your current model of car - maybe because your current run-around is approaching the end of its life - purchasing a new one from a dealer's forecourt may seem the best thing to do. After all, dealerships offer some superb deals with their new car stock. New vehicles frequently come with great warranty schemes and even reduced-price servicing. Brand new cars, when compared to second hand ones, often offer motorists a good deal more confidence, but how do you go about financing the purchase of a brand new car which - most of us already know - will immediately become devalued the minute that it is driven off the forecourt. Unless you have several thousands of pounds already saved up for your new car - or even a second hand one for that matter - you are probably going to have to look into your car financing options.


Manufacturer Deals


Usually offered by registered car dealerships, manufacturer deals tend to be part of the promotion package that entices you to buy a brand new car. Often bundled in with servicing and warranty packages, manufacturer's finance deals very greatly between models and from year to year. Leasing and finance options that many car manufacturers promote can be attractive option because the vehicle is sold with the finance deal 'bundled in'. This means your car purchase and credit is all put together in a single package which can make things seem simpler, especially if there is an incentive such as zero percent financing for the first few years or corresponding repayment instalments. Attractive as they are, it is worth looking into independent financing deals, too. Third party leases and car loans can - in some cases - beat that which is offered by the car salesman at the point of sale of the vehicle. This is not to say that this is always the case, however. It is simply a good idea to shop around and not opt for the finance deal which is on offer from dealership in question.


Leasing A Car


A vehicle lease is usually put in place for brand new cars only, rather than second hand ones. A lease is an agreement to pay a certain amount of money for the use of a car for over a fixed period of time. In some cases, this will be a three year lease, but you can easily find lessors who will offer four and even five year leases, too. The individual paying the cash - on usually a monthly basis - is known as the lessee. This person then has the benefit of driving around the car. However, it is important to note that the driver and keeper of the vehicle is not the owner. The party providing the upfront money to the car dealer is known as the lessor or the leasing company. The lessor will basically buy the car on your behalf and then set an amount of money for the lease deal. Should the lessee signs up to the leasing company's terms, the car dealership is paid for the vehicle and the lessee can drive away with the vehicle.


One of the best things about leasing a car, is that you know exactly how much to put aside each month for the use of the car. Because the warranty and initial servicing is usually inclusive with new cars, leases mean that drivers just need to consider their fuel costs on top of the lease's instalments and little else. Nevertheless, there is something important to underline. Once a car lease comes to an end, the lessee is obliged to return the car to the lessor. Any residual value that is held in the car after the term of the lease is owned by the lessor. This means lessees cannot sell the car and upgrade down the line. They are sometimes offered the chance to buy the car from the leasing company, but this offer is not always made.


Car Loans


Under a finance deal offered by a dealership, the person selling the car is operating much like a conventional money lender or even a bank. However, car loans can be sought from third party companies, too. Following a credit check, the car is purchased with borrowed capital which must then be repaid by the car owner. If instalments are missed, then the car may be legally repossessed. Unlike a lease, with a car loan the full title of ownership is given to the motorist, meaning that once it is all paid for that the car can be sold. However, like leases, the length of time that a car loan works for can vary depending on the terms. Car loans tend to work for people who want to own and drive their car for several years once it has been paid for. However, the price that is being paid per instalment can change, depending on the percentage rate of the loan, so it is essential to check this before signing up to a finance option like this.


Resources


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