Vehicle finance is critical on many levels. Choosing the right type of financing will help you to get the lowest cost and it will help to solidify your ability to pay for your vehicle in affordable payments. There are several different types of financing options available, each with its own benefits and drawbacks. Take some time to look at several before choosing one car finance option.
Vehicle Finance Options
When it comes to car finance, you do have several things to think about. One of the most common types of financing is through an installment sale. Here, a vehicle used for mostly private use is able to be financed. You will need to make at least a ten percent down payment and you will have 54 months to pay off the vehicle.
Another option is a lease. You need to use the vehicle for production of income and in doing so there is no upfront down payment required on this type of vehicle finance. You will need a good credit rating to obtain this type of loan, though. For work related vehicles, you can claim some of the upkeep on your taxes. The maximum lease term is 60 months.
You may wish to consider a residual lease which allows you to finance up to 60 percent of the car and you need to pay the other 40 percent at the end of the lease term. This is an expensive car finance option but for some business owners, this is a good option. Or, consider an access bond, which allows you to use the equity in your home for your vehicle finance. This is less expensive but there are risks associated with this option, including using your home as collateral. You could pay off your vehicle over ten years through this method, though.
Best Way To Finance A Vehicle
As you consider the vehicle finance options you have, consider how well they meet your specific needs so that you can select the right type of car finance for your situation. For example, how much money do you have to put down to secure the vehicle’s purchase? Do you wish to extend the lease over the longer term (although you will have to pay more for it at this point in interest)? Think about the costs associated with car finance in terms of immediate repayment requirements (the amount you will pay every month or every two weeks) compared to the amount you will pay for the vehicle over the long term.
If you are unsure about your credit score, or qualifying for financing with it, or the requirements of any type of vehicle finance, obtain quotes and compare them carefully. You also want to shop around since not all car finance locations are the same in terms of cost effectiveness. Keep in mind that whatever type of financing you select, you are likely to have to live with it for some time. Taking some extra time to consider all of your options may be a very wise decision in this case.
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