Every person wants to own a car. It is all about living the dream life, where you own a house, have a loving family and of course a new car. If you are short on the last part of living your dream now is the time you should think about financing a car purchase.
Despite what people say, auto financing is not one of those crazy schemes, which dealers are out there to get you with. In fact, getting a loan or entering into a contract with a dealer for purchasing a car is less hectic than purchasing it outright with cash.
Reason Why Financing a Car Purchase Is Better than Buying a Car with Cash
If you are one of those people who think that if you buy a car with your savings account or credit card, you will avoid the interest, then think again. You are forgetting what this might do to your credit rating and where you will get immediate cash if you are in an emergency.
Benefits of Financing Your Car Purchase
- Low interest rates than personal loan
- Small monthly instalments
- The collateral damage in auto loan is the car itself whereas the collateral damage in a personal loan is your house
Financing a car purchase also gives you the benefit of owing a car within a year or two, where no money is spent from your pocket. The 3 to 4.5% interest rate on auto loans is significantly lower than the interest rate on any other loans.
Auto loans are mostly based on good credit rating. Where a dealer might overlook your bad credit rating, a bank bases your loan application solely on it.
A good credit rating in UK is considered above 800 and anything below that is considered bad. A customer with a credit rating might get a 0 or 2.3% interest rate on the loan while a person with 750 score might get a 10% interest rate.
Whether you are going for a dealer loan or a bank loan, the risks involved are far less than those involved in personal loans.
Perhaps, the best part about financing a car purchase is the benefits offered by the PCP contract. This contract gives the person the option to either buy the car, sell it privately to pay the remaining amount or pay the resale price to own it.
Both 2015 and 2016 (till now) has been a great year for car financing as the interest rates on auto loans are as low as 4.5%. This percent is predicted to increase in the following years. So, this is time to start financing your car purchase because it will be easy to pay the APR.
Though, buying a car outright carries 0% interest, car financing gives you room to spend your personal savings on other things. You are not restricted by your onetime payment and the three years repayment period gives you more than enough time to pay back the loan.