Financing a new car is generally far easier than financing a second hand car. There are several reasons for this, but all is not lost if you need to buy a used car and need financing to do so. There is broadly speaking three main ways to finance the purchase of your 2nd hand car.
Hire purchase is the best option and is available from most car dealers, but not private sellers. Basically you pay a deposit and arrange to pay the balance off using a series of monthly repayments. How many payments you have to make and how much interest you end up paying are all part of the terms and conditions of the hire purchase agreement. If you plan on keeping your car for several years this is a very convenient option and a relatively cheap one too. However, you have to bear in mind that until you pay the full amount of the hire purchase agreement off your car is owned by the finance company you are borrowing the money from.
PCPs or personal contract plans are a relatively new way of financing the purchase of a used car. As with hire purchase you have to pay a deposit, but you pay a lower monthly repayment amount. This is because PCPs are designed differently. At the end of a hire purchase or HP agreement you owe nothing with a PCP you will still owe some money on the car. Whether you pay the balance owed and become the car’s owner or hand the car back is up to you. Alternatively, you can take out a new PCP against another vehicle and start the whole process again. It is very similar to leasing a vehicle if you decide not to pay the balance owed and take ownership of the car.
A personal loan is one of the most effective ways to purchase a used car. You simply take out a loan for the amount of the vehicle and use that to buy the car outright-no need to pay a deposit or secure a car finance plan through a dealership. You then repay the personal loan in instalments over time. This type of car finance will likely cost more and is harder to obtain. In order to qualify you’ll have to show proof of steady employment, have a good credit history, and own a home or pay a mortgage.
As with all forms of financing it is very important to do your research and work out which is the best option for you. No matter what financing option you chose you must read the small print and make sure you understand it before committing yourself and buying your used car.
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