Has your car broken down and you need a way of getting to work and picking the kids up from school? Or are you simply in need of a newer vehicle to impress the boss, or something bigger to accommodate new family members? Taking out finance to purchase your next vehicle might be cheaper than you think, and could even save you money compared with other options such as leasing or taking advantage of dealer credit. Better still, car loans can be used for any vehicle – new or second hand, imported or domestic, diesel, petrol or even electric.
Is a loan better than a lease?
In recent years leasing a car has become an increasing popular option, with fixed monthly payments allowing you to jump into a brand new vehicle knowing that you can replace it with another new one in just a few short years. Vehicle leasing started in the corporate market, but has made its way over into the consumer market too and has made a big splash. However while it offers convenience, the financial fundamentals behind it aren’t in your favour. Vehicle leasing companies are making big profits by charging your more to rent your car than the vehicle is depreciating in value. Choosing a car finance deal instead, then selling your vehicle when you want to upgrade, will in most cases put you in a better financial position than leasing.
What about dealership loans?
Car dealers and manufacturers will often offer you a buy now pay later offer, where you are offered a brand new car on the never never. The deal might look good at first glance, but should you fail to pay off the balance in full it can often have high interest rates attached. For those that know they won’t have the money to make a full repayment, taking our a car loan is a cheaper way of buying the car. It also offers you more choice, and you won’t necessarily need to go for a new car. Depreciation can knock thousands off the value of a car on the first day of ownership, car finance will cover more savvy almost-new purchases while most manufacturer credit offers will not.
Are car loans just personal loans?
Many car loans are simply personal loans that are used to purchase cars, while others are dedicated loans for the purpose of buying a car specified in the loan application. Both are listed here. If you are looking to borrow for more than one purpose, for instance to buy a car and do home improvement, then a personal loan is a better choice. Car finance is more like a personal loans than a logbook loan, which are not used to finance the purchase of a vehicle and shouldn’t be confused with car loans.
Which car should I borrow money for?
Don’t over stretch your budget just because you are eligible for a larger loan. It’s better to make a smart purchasing decision and get a cheaper car that will allow you to pay back your loan quicker. Look for almost-new vehicles rather than brand new cars, as you’ll avoid the worst depreciation this way, and opt for makes and models that are known the depreciate slower so that when you change car you’ll have more value left in your vehicle.