Financing Your Luxury Used Car With Hire Purchase
April 11, 2017 at 5:08 PM
Car Finance: The Options
If you've got the money to hand, cash can be a very cost-effective way to make your purchase. Car dealers are often willing to reach a discount for cash. You can also opt for card: using a credit card offers you additional protection on the purchase cost. However, some dealers may charge a fee for using a credit card though, or they might not accept credit card at all - plus credit card purchases often incur high-interest rates over 15% APR. You may need to consider going beyond your personal finances by taking out a bank loan or a peer to peer loan. You might also consider leasing the car, although if you lease by personal contract hire, the car will never be yours to own - plus you have mileage restrictions whilst you lease the vehicle. One of the most popular ways of paying for luxury used cars is hire purchase. This involves paying an initial deposit, and then making fixed monthly payments over a certain period. After all payments have been made, you will own the car.
How Does Hire Purchase Work?
Normally the car dealer will arrange the contract, although you can also go through a broker. The loan is secured against the car, and so you have no ownership until you've made all the agreed upon payments. Interest rates are generally more competitive for new cars than for used cars, but it depends upon your credit rating; having a better credit rating will allow you to get a better rate. Normally, you will start by paying about 10% of the car's value, and then you will make the rest of payments monthly over the next one to five years. Don't make an instant decision with the contract; make sure you've understood precisely what terms you are agreeing to.
Advantages of Hire Purchasing
This way of paying for second-hand cars is very flexible. Being able to choose the length of the payment period allows you to adjust payments to fit your budget. The interest rates are normally fixed. The deposit required at the beginning is generally quite affordable. Sometimes, you have the option to return the car after having paid a certain amount of the value without incurring any penalties for not completing the contract.
Downsides of Hire Purchasing
Because the loan is secured against the car, the car is not really yours until all payments have been made. This means that if you find yourself unable to make the next payment, you could have the car taken away from you. The smaller the initial deposit, the larger your monthly payments will be. You can stretch out the contract for a long time to reduce the monthly payments, but this will also mean you end up paying more interest.
Car Finance Calculator
If you're unsure whether you'll be able to afford and manage this kind of contract, consider using an online finance calculator. Autochoice Bristol offers competitive car finance to suit all budgets, and it's easy to apply! Read more about available finance options here.
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