Archive for the ‘Car Finance’ Category
Hire Purchasing – A Car Finance Option for You
When it comes to car financing, you may think that the personal loan was your only option. If you have been turned down, there is another option out there for you. Hire purchasing is a popular option for many people, especially when they are looking at buying a new car. You can drive the car while you are making the monthly payments.
The benefit is that you can make payments towards the ownership of the car, so you don’t need to afford everything in one lump sum. This is why many people take this option for their new car because the prices are often way out of their league. You can arrange affordable monthly payments and you can enjoy the luxury of being the first ever owner of a car.
However, this type of car loan does not go without any risks or disadvantages. The main problem is in the name. It is a hire purchase so you are hiring the car until you make that final payment; that is the only time that you will actually gain the ownership of the car. This brings out the problem if you find that you are struggling to make the payments, especially later on over something that you haven’t considered.
Many people will try to refinance a loan when they start to struggle for money but the car dealerships will not always entertain this. Loan providers will because they run the risk of not getting their money back. However, the car dealership will be able to take the car back and that is something that they will consider more than arranging a different payment plan with you.
Because you do not own the car, you will not be able to sell it off. This could mean that you are stuck with the same car for seven years, which is the maximum term for most car loans. Luckily, this is the length of the manufacture warranty, so at least your car repairs are covered by them. However, you may find that the car is uneconomic for you or that there is a better model brought out during that time. This is just one of the risks that you take.
The interest rates are usually much higher than you would get from a personal loan so you will end up paying more over the term of it. The benefit is that you do need to put a deposit down so you won’t need to take the full car amount out, which will keep the final amount down.
