Finance for Your First Car
Are you a young driver thinking of buying your first car?
You may find that shopping around for the best car finance rate can be a hassle. You want the lowest repayments possible with a finance company you can trust.
There are a few ways in which to finance the purchase of a car.
Taken out from a bank or car dealer. Loans are easy to obtain when you have a home. You have this collateral to make you more attractive to lenders. When you do not own a home then you need a different kind of loan, a personal unsecured loan.
Hire Purchase (HP)
You would normally take out hire purchase (HP) or 'conditional sale' agreements when you buy a car.
This is a traditional form of finance agreement: you choose your new car, agree how much deposit to pay and your finance term; your monthly payments are then based on your balance plus any interest charged; at the end of the contract when you have made your final monthly payment, the car is yours.
An Hire Purchase agreement is a debt, and you don't actually own your car until the debt is paid off. Until then, they belong to the person you bought them from (the creditor).
Car Leasing, also known as Contract hire involves making monthly payments, under which you are in effect hiring the car for a fixed period.
Car leasing is the future of owning new cars and changing them every 2 or 3 years without losing thousands of pounds in negative equity.
Very few people have the capital to buy a new car without some financing, even if you do have the capital to purchase a new car outright you will still lose serious amounts of money should you chose to change it within 7 years.
As an example, if you lease a £20,000 car that will resale at £13,000 after 36 months (Known as the Residual Value), you pay for the £7000 difference over the 36 Month term, plus finance charges, plus possible fees.
At the end of the lease you will not own the vehicle. You can give it back or keep the car if you buy the resaleable price.
You will also need to pay for :-
Vehicle Excise Duty (Road Tax)
MOT if your vehicle is more than 3 years old