A new car can cost anywhere from $500 to $500,000. Although many people use car loans or loans from a bank to pay for their cars, it is also possible to lease a car.
When you lease a car, you are paying a monthly fee for using the car, but at the end of the lease, you can give up your right to continue using the car or buy it at a discounted price. In essence, a lease is just another kind of loan that provides you with transportation while saving you money.
How You Can Finance Your Car
1) Car Loan
The most common form of car financing is the car loan. To get a car loan, you'll need to apply through a bank or credit union.
Your credit score will play a role in the interest rate you get, as well as the term of the loan. The higher your credit score, the lower your interest rate will be, and the shorter your loan term will be.
2) Finance Through the Dealer
When you buy a car from a dealership, you are likely to get financing through the dealership itself. This is known as dealership financing.
Dealer financing is different from a loan you might get from a bank or credit union because it is a loan offered by the dealership itself and not a lender.
Dealer financing is often a good choice for drivers who do not have established credit ratings.
3) Personal Loan
If you need cash for a down payment, you can use a personal loan to pay for your car. Personal loans are available through online lenders and traditional lenders, so you can use a bank, credit union or another lender to get the amount of money you need.
Personal loans are a great option if you don't have equity in another asset that you can use as collateral. With a personal loan, you can get the money you need and then pay it back.
4) Hire Purchase
Hire purchase, or HP is another way that you can finance your car. HP is basically a loan, but instead of paying it in regular instalments, you pay for the car in very large instalments.
You also won't have to pay interest, but you'll end up paying a higher price for the car. If you have the cash to buy a car outright, you should definitely do it. But if you don't have the cash, a hire purchase could be a good option for you.
5) Lease Purchase
Lease purchase is similar to HP, but instead of paying large instalments, you pay a small amount until you have built up enough equity to purchase the car outright.
When you lease-purchase a car, you are leasing the car for a specific period of time and then, at the end of the lease, you can purchase the car for the residual value.
Conclusion
There are several ways that you can finance your car. Before you buy your next car, you should decide what kind of financing you want to do.
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