If you don’t have the cash to hand for a brand new car, have no fear–there are a few ways that you can purchase a new car without needing a lump sum ready and waiting. These options are financing or leasing your new vehicle.
In this article, we’re going to dive deep into the meaning of these terms to help you get to know both processes a little better. Take a look below to find out more.
Financing Your Car
Financing a car is when you buy your car with borrowed money. It means you have taken out a car loan and are repaying it in monthly installments with added interest. Once you have paid off the loan and completed all monthly installments, the car is effectively yours to do as you, please. You may keep it for a long while or sell it.
One of the advantages of financing a car is that you do eventually own the vehicle. You are also at liberty to sell the car before you’ve finished paying the monthly installments and can pay off the rest of the loan with the lump sum from the sale. It is important to note that some lenders may require you to pay an additional fee if you end the loan early, known as a payoff fee.
To finance a car, you usually need to be approved for a car loan and like other types of loans, this will require a minimum income and credit score. If you have poor credit or a low monthly income, your loan may come with very high interest. However, there are some lenders willing to offer car loans to those with bad credit so remember to shop around before applying.
Financing a car offers slightly more flexibility than leasing a car, but there are advantages to the latter too.
Leasing Your Car
Leasing a car also involves monthly payments but at the end of your contract, you no longer own the car. Leasing is like renting a car for a period of time and your monthly payment covers the depreciation of the vehicle during your contract. The car dealership will also set limits on the depreciation of your vehicle, like putting a cap on how far you can drive the car within the leasing period. They may even charge a per-km penalty for every kilometre you go over the cap to ensure that the car remains in good quality on its return to them.
The biggest pro of leasing a car is that your monthly payments are often lower than that of financing. This means you can get a better vehicle for the same amount you would be paying for financing a car. However, you have much less freedom with a lease. At the end of the contract, you have to return the car and negotiate another lease, though some people opt to buy the car they leased if they can afford it.
In addition, when you are leasing a car, you are unlikely to be able to end the contract early, especially without paying a large fee. You may also be charged for any damage that happens to the car during your contract, which can be costly. You should consider this before leasing a car.
if You Are Struggling To Buy a Car and Need a Loan, Contact Car Loan Masters!
Working out how to pay for a new car can be difficult, but that’s where we come in. Car Loan Masters is a car finance and loan company in Markham offering quick and easy car loans to all kinds of people, even ones with bad credit! Get in touch today to find out more.