Buying a car is easy when you have car finance. But, the world of finance can seem very confusing for a buyer. There are several options to consider. You have to make many calculations. And, you have to take several decisions. But, don’t get overwhelmed. Your perfect car financing guide is here. It will help you overcome all the obstacles and aid you in finding the most beneficial financial solution.
Your Financial Capacity
There is no point in finding your favorite car and then knowing that you cannot afford it. It is important to research and prepare a budget before beginning your car search. So, before you start looking around for a new or used car, use online calculators to ascertain:
• How much you may be able to borrow, and
• What your monthly payments will be
Your Credit History
Not all lenders offer car finance packages to people with default history. But, there are some lenders/credit providers who will consider your car finance application. They will take into consideration the following situations:
• When the default was listed
• When the default was paid
• The reason for the default, and
• The situation that has led you to default
So, if you have a default history on your credit file, make sure you apply with a lender that offers bad credit car finance. Also, know everything about the default. It will help you in answering any question asked by the lender.
The Purpose
Tax implications and car finance options are different for different purposes. Wrong choice can cost thousands of dollars in loan fees, extra interest charges and penalties. So, take some time in deciding the use of your car. If you are going to use the car predominantly for personal use, then you will have to apply for a personal loan or car loan. And, if you are going to use it for business purpose, you will have to obtain another type of loan package.
Source of Car Finance
Choosing the right source of car finance for your new or used car, can be complex and time consuming. So, don’t take a hasty decision. Understand them in detail and then select an option.
1. Dealer Car Finance
Many car dealers offer finance to buy a car. If you are considering "dealer car finance" as an option, you should ask the car dealer some questions, such as:
• What is the dealer's interest rate?
You should compare the dealer's interest rate with the interest rates of other car finance options. It will help you in choosing the best rate.
• Do you have to pay a balloon payment at the end of the dealer car finance loan?
Balloon payment is a type of mortgage in which you have to make a large payment at the end of the loan term. Lower monthly payments are offered to the car buyer because of his agreement to make a large payment later.
• Is the price of your new or used car negotiable?
In most cases, the price of your new or used car is not negotiable with dealer car finance. So, check this before signing the loan contract.
2. Alternative Car Finance (i.e. from banks, credit unions, finance companies, etc.)
There are numerous Alternative Car Finance options and products that you should consider. Here is a list of the most common alternatives.
Option 1 – If the car is used for personal purposes
(A) Personal Lease:
The personal lease product allows for:
• A flexible loan term ranging from 1 to 5 years
• Fixed or variable interest rate
• The interest rate is generally lower than other car finance products
• You can select the residual value that suits you, which will give a lower monthly repayment
(B) Car Loan
A car loan enables the lender/credit provider to take security over the car you are buying. The key details are:
• Your vehicle must be purchased from a licensed car dealer
• A flexible loan term ranging from 2 to 7 years
• You can select a residual value, which can reduce your monthly repayment
(C) Personal Loan
These loans are also called unsecured loans. The car that you are buying is not used to secure personal loan. The key details of personal loans are:
• Flexible loan term
• Simpler approval requirements
• Slightly higher interest rates
Option 2 - If the car is used for business purposes
(A) Chattel Mortgage
This unique car finance product uses the car that you are buying as security. A chattel mortgage allows for:
• A flexible loan term ranging from 1 to 5 years
• Lower interest rates
• A tax deduction, because the car you are buying will be used for business purposes
The chattel mortgage car finance product is used by:
• Sole Traders
• Partnerships
• Companies
• Trusts
• ABN holders
After you decide on all the things mentioned in this car financing guide, you can apply with a lender or dealer. Remember that don’t take the first deal that is offered to you. Take some time in understanding every aspect of the car financing package. Don’t forget these tips because they will ensure that you get a tension free car finance package.
Make car financing easy with pre-approval from Singh Finance. The Aussie brokerage firm has an experienced team of finance experts who will find the best car finance package for you. For an obligation free assessment, please contact on 0424 190 908 or “Enquire Online Now.”
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