4 Simple Ways To Finance A Car Purchase

4 Simple Ways To Finance A Car Purchase

When it comes to making big purchases, buying a car is usually at the top of many people’s lists – second only to buying a house or paying for an expensive holiday. Therefore, determining how to finance your car purchase is an important decision. You don’t have to wait until the paperwork is ready before thinking about the most sensible way to pay for your vehicle. This post explains some of the financing options available for your next car purchase.

1. Dealer finance

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With dealer finance, yourcar dealership makes arrangements with their bank or lender to secure a loan for the purchase. They can take charge of all arrangements without excessive input from your end. While dealer finance is a convenient way to finance car purchases, there are downsides to the deal. For example, the dealer may increase the monthly repayment to make a profit. Plus, they can set their own interest rates, which could be a markup on the financial institution’s rate. 

2. Consult a lender

Consult a lender to assess your credit rating, liabilities, and assets. This will help verify if you are eligible for vehicle financing. Getting pre-approval before visiting the dealership can speed up your car purchasing process, and you will have a minimal chance of getting rejected since both parties will understand your limits. If your credit rating is poor and you need a vehicle, don’t give up hope as you can try to search for cheaper used cars on auto websites like Edmunds. Consider using an online auto loan calculator to calculate the monthly payment estimate on a used car to find a great deal near you. You may want to avoid longer loans with lower monthly payments, as they can lead to negative equity. When possible, get a co-signer on your car loan to make it easier to secure approval for the full purchase price of your potential vehicle.

3. Buy with cash

The simplest means to finance your car purchase is to buy with cash in full or partial payment. You will own the vehicle outright if you fund all the purchases with cash. On the other hand, getting your car through a financial agreement such as personal contract purchase (PCP) or contract hire means you won’t own it. Therefore, you can’t sell the car, and you may even lose it when you don’t meet your repayment obligations. When financing with cash, ensure you have enough money to cover the running costs of the vehicle, including road tax, maintenance, and insurance. 

4. Personal loan

A personal loan is another cheaper method to finance your car purchase. However, you should have a good credit score. You can secure a personal loan from a bank, finance provider, and so on. This financing option could allow you to spread the costs over one to seven years. Search for affordable interest rates by comparing the annual percentage rate (APR), which may include extra charges you must pay plus the interest.

Securing financing for a new car doesn’t have to be stressful. Its a smart move to shop around online to find the cheapest financing methods that are available to you. Better still if you have time on your hands, consider saving up the funds required to reduce your future debt burdens.

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