Car Finance Deals – Uses a Hire Purchase to Finance Your New Vehicle

 

In this article we’ll explain what car finance deals are and how to go about finding them. We’ll also answer some questions like “what should I look for in a car finance deal” and “where can I find the cheapest car finance deals?” and even “where can I get a good deal on car finance that won’t break the bank?” There are lots of different types of car finance deals available to consumers but here we’ll explain the main types and how they work.

First there are secured car finance deals, where you take out a loan using your house as security against the loan amount. You will usually have to have excellent credit or have a co-signor who has excellent credit, and will probably have to pay a one off fee for taking out the loan. Once this is done the loan is secure and will be for a fixed length of time – usually this is around five years. With secured finance the monthly repayments are normally low because the lender knows they have something of value to put down as a security against the money so will offer very low rates of interest. The advantage of taking out a loan is that the repayments are normally lower and you get a longer loan, with better terms, than unsecured car finance deals.

Then there are two other types of car finance deals, the first being an outright purchase and the second being a second loan. An outright purchase is when you take out a loan in order to buy the car but you don’t actually have to pay for it until you’ve paid off the initial loan. This means you’ll pay a higher interest rate for the loan and the car will cost more. A second loan will be for a longer period of time and will cost you more, as you’ll be repaying the amount already and in addition the monthly repayments will increase.

So which is better when it comes to using car finance deals? The answer is that whilst using personal loans and dealership loans can save you a great deal of money initially, they often come with hidden costs and can often be unsuitable for the needs of your particular circumstances. A personal loan can be cheaper if the dealership has charged a small processing fee – sometimes a one off payment is all that’s needed to secure a good deal – however it’s important to remember that if the car goes into repossession it’s possible that you won’t even get the car back. On the other hand, personal loan providers offer a range of flexibility and allow you to shop around for the best deal but they also charge much higher rates of interest.

Car hire is a good option if you’re looking to drive a new or used vehicle temporarily, say while you’re on holiday, and then either repay the hire through monthly installments or by making a larger initial deposit. By taking out a hire purchase agreement, you put yourself under considerable financial risk, as your deposit will only cover the price of the car, and of course you would have to find the money to pay for insurance and maintenance. Hire purchase agreements usually have an expiry date, so you would have to take care of those deadlines i.e. by making the deposit on time every month or else the agreement ends and you lose your deposit.

A deposit arrangement for hire purchase works more like an IVA than a purchase agreement, so there’s not a need to make monthly payments. You’ll have a fixed deposit, which is taken out by the finance provider, and that’s it, you don’t have to pay anything more until the agreed time of the car’s delivery. If you should find the car doesn’t arrive on time, you simply pay the deposit and renew your contract.

However, a personal loan is by far the cheapest way to finance your new car. Your finance provider will give you a fixed rate of interest, which you’ll have to live with. But if you’ve got a good credit score, then this could be an attractive option. By going for a personal loan, you can spread the cost of interest over a longer period, meaning that you’ll pay less in the long term.

You could also use hire purchase to finance the down payment on the car. You can arrange this by making a down payment of a smaller amount against the total cost of the vehicle. The total cost of the vehicle, including the deposit, repayments and annual charges will be taken into account when calculating your monthly repayments. This is a great way of paying a significant deposit and then spread the rest of the repayments out over a longer term. However, because you’ve arranged the repayments for a long time frame, you’ll be paying interest at a higher rate of interest than you would with an alternative vehicle finance deal. So make sure you get quotes from a number of lenders before choosing the one that suits you best.

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