You need to buy a car, but no matter how much you try, you simply can’t save up the full price of your dream vehicle.
Not to worry! There is the choice for you to take out car financing, which, in 2024, is a booming industry that can offer a range of different options for different circumstances and budgets.
Of course, it is a good idea to have a brief idea of what these loan types are, and here, you will be walked through the car loan options that are available.
Car/Auto Loans
This is, without a doubt, the most common option for financing a car. This allows you to take out a loan to buy a car over a set period and then pay it back with interest. Some car and auto loans have a fixed rate, whereas others may be variable. You can usually get a car loan from a dealership, a bank or a credit union. If you are looking to buy a used car with this loan type, you may need to opt for a different lender option.
Hire Purchase
Next is another loan type you may have heard of: hire purchase. This is a car loan where you usually pay a deposit upfront (between 10-20% of the car’s full cost) and then make fixed repayments over the loan period. When the last payment has been made, you will own the car. It goes without saying that the higher the deposit that you put down, the less you will need to pay overall and each month.
Personal Contract Purchase or PCP
A personal contract purchase is similar to a hire purchase, but with a PCP, your monthly payments will cover the depreciation of the car over the term of the loan. Once you have reached the end of the term, you will have the option to return the car to the dealership, trade it in for a new model, or make a balloon payment. The last option is usually higher than the monthly repayments, which allows you to legally own the car.
Leasing
As the name suggests, when it comes to leasing a car, once the loan period is over, you don’t own the car. You simply return it to the company that you leased it from. This is ideal for people who are looking to try their hand at different cars, and, much like the other options, you will still need to pay a monthly fee for a set period of time, which usually ranges from 2-4 years. This also has the benefit of a lower upfront payment.
Personal Loan
OK, the reason that many people choose not to take out personal loans when buying a car is that, simply put, they often lack the flexibility that comes with a more specific car loan. A personal loan to buy or lease a car is not uncommon, but they often come with higher interest rates. If, of course, you want to buy a used car and upgrade it, then this may be the best option, as you will have more flexibility with the funds to do what you want with the money.
About the Author/s
The New Jersey Digest is a new jersey magazine that has chronicled daily life in the Garden State for over 10 years.
