Are you thinking about buying a new car but do not know how to finance it? Most people finance their vehicles. These are the six most common ways to do it. Which one is best for you?
Obtain a personal loan from a financial institution
It is the most common form of financing and is usually offered by banks, savings banks, and other credit institutions. To access these loans, you will have to show that you have good credit and that you will be able to return the money within the agreed period.
The interests and the total costs can vary a lot between the different loan providers, making the purchase of the vehicle much more expensive. Keep in mind that the provider will pretend to secure the loan with one of your assets. By doing this, you may put your possessions at risk.
Pros: you can process it quickly and dispose of the funds almost immediately.
Cons: the risk and the interest rate can be high.
Obtain a loan from a friend or relative
Another option is to get a loan from a friend, relative, or acquaintance instead of from a credit institution. In this case, it is important to discuss the loan in detail and leave everything in writing to avoid future problems.
Pros: it is unnecessary to perform any solvency analysis, and you will have more flexibility in terms. Depending on your relationship with the person who lends you the money, the interest rate may be lower or even non-existent.
Cons: You can put at risk a friendship or a family relationship.
Purchase in installments
This method of financing is based on purchasing by installments. It consists of signing a contract with the seller (local or international) by which you agree to buy a vehicle in a certain period. You can use the vehicle while paying fixed monthly fees until paying the full price. You will be the registered driver and responsible for insurance and vehicle maintenance, but the seller will be the legal owner until the last payment is effective. Afterward, the car will be completely owned by you.
Pros: sellers offer this alternative directly, and it is quite simple and quick to process. Payments are flexible, and the deposit is generally small.
Cons: You may end up paying more in the long term because the interest rate will generally be higher, which is also a drawback. Unlike flexible financing, you usually cannot change the car for another model once it is your property.
The largest car brands offer the possibility of a flexible payment plan. It is an option similar to the purchase in installments with some differences. Unlike the previous method, when you complete all the payments, you can decide to keep the car or return it without any commitment or exchange it for another model of the same brand and pay the difference.
You could also negotiate a discount for the new model. This option is usually offered for specific models of the brand and not for all available cars.
Pros: You can change your mind at the end of the contract about which car you want to have. You have the confidence that offers you a great brand of vehicles recognized in the market.
Cons: Contract terms may be less flexible in negotiating than with an installment purchase.
If you are considering renting a car through the option of leasing or renting, you will have to make a monthly payment to the leasing entity to use the vehicle. The only requirement is that the mileage cannot exceed a specified limit. At the end of the contract, you will have to return the vehicle to the entity or buy it for its residual value (some dealers do not offer the purchase option).
Pros: you will not have to worry about the depreciation of the vehicle, and you can easily switch to another model.
Cons: the total costs of the operation can be high due to all the included services. A penalty may have to be paid in the case of exceeding the allowed mileage limit.
Save and pay with things you do not use
You do not need to get involved in any financial agreement if you already have some money saved, you have received an inheritance, you own an old car and sell it, or other things that you can get rid of to earn money. There is also an unlikely event that the lottery will touch you. Then, you will have enough money to pay for your new vehicle.
Pros: you will not pay interest or depend on anyone else.
Cons: It may take more time than other alternatives. It requires a greater economic effort, and not everyone can afford this option.
In conclusion, buying a new car does not have to be a problem for you. There is an alternative for every need, lifestyle, or pocket. Then, get rid of your old car now and get a new one! You can start by finding out how much you could get for it.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.