Car finance refers to all the different financial instruments that enable a person to get a loan, such as car loans and leases. It is a very broad sector and there are many different ways to go about getting the finance you need. There are three different types of car finance. These are secured car finance, unsecured car finance and choice car finance. Each one is slightly different and will be explained further below.
Secured car finance is the easiest type to get as it requires no collateral. This means that the lender is protected in case you should default on the loan. This is a good thing because the lender can sell your car back to recover his losses. This makes secured car finance a popular choice with those that need quick cash.
The second type of car finance is called pre-approval. With this type of finance you are able to apply for a loan in advance of buying a new car. You will still need to visit a dealership and arrange for an inspection but other than that there is very little between you and the finance company. pre-approved loan applicants are usually offered a competitive interest rate and terms.
The third type of financing is called Used Car Finance. This is a very good choice for those that are interested in buying a used car. If you choose a dealership that has several outlets then the chances of finding a very competitive interest rate for used car is much higher. However if you visit a single dealership then this option is not available.
With this type of finance you have the ability to set up a contract so that the dealer will buy your car from them. In return you pay a fixed amount monthly plus interest payments to the finance company. The dealer marks up the price of the car so that you will pay more if you buy it from them. If you have to visit a dealership then this option is not open to you. Instead you will have to visit the finance company’s website.
Most people are inclined to go with the contract purchase option when it comes to used car finance. This is also the most straightforward and traditional way of going about getting finance. There are several advantages to this kind of financing including the fact that the finance company is forced into a contract with you. They also benefit from the fact that people tend to stay with their own dealerships for a longer period of time. It is also much easier to research and compare the different finance options that are available when you go with a personal contract purchase.
It is important to remember that all these finance options come with pros and cons. It is therefore important to weigh up the pros and cons before deciding on the best option for you. Remember that each individual has their own circumstances and your circumstances are likely to be unique.
Hire purchase is probably one of the most straightforward finance options available. It is also one of the more popular with consumers as it allows the customer to drive the vehicle for a specified period of time without having to make any payments. When a hire purchase is made you are not committed to any particular vehicle and you can shop around for the best deal. The major disadvantage to this form of vehicle finance is that the interest rates do tend to be higher than those on other types of loans. Finance companies will charge more for a hire purchase because they risk losing their investment if the vehicle does not sell after a specified period of time.