Car Finance Options
The car finance option you choose depends on the importance you give to owning a new car. If you value having the latest models on the market, then this will justify spending more money on this privilege. If your view of a car is orientated towards transportation and comfort (you want a car for practical reasons), then owning the newest model should take a few steps back on your priority list. You should think about these facts first and then consider the more tangible issues of car finance options.
The car finance deal that you are going to make starts when the salesperson asks you what kind of car finance option you want to use. Your answer can be one of the following: buy the car, lease the car or pay cash for the car.
When buying a new or used car there are so many options now available. From personal loans to more specialist finance such as Personal Contract Purchase it leaves a lot of options for which to choose from. So what are all the options and which one is right for you.
Hire Purchase: In a lease, the financier leases out a car to you for a certain time-period, after which the financier can either take back the car or sell the car to a third party. In effect, you will not be the owner of the car either during the tenure of the lease or even after the lease has been terminated. This is the technical definition of a lease and you may come across several variants depending on the financier you are dealing with.
Lease Purchase: Lease is similar to a Personal Contract Purchase in that a lump sum amount is deferred to the end of the agreement. This lump sum reduces the regular monthly payments and allows you to purchase a more expensive care than you thought possible.
Contract Hire: This is an agreement where a rental is paid in return for the vehicle over a period of 1, 2, 3 or 4 years. It is ideal if your business prefers to reduce its financial risk by not owning the vehicle and having to deal with the administration with new cars and also worrying about the value of the car over time
Personal Contract Purchase: PCP is fast becoming a very popular method of car finance. You pay a monthly amount towards the purchase of the car and at the end of a pre-defined purchase period you can then choose pay a lump sum to buy the car or just return the car with no obligation.
Over the last five years, the dream of owning a car has been coming true more and more easily for the country’s burgeoning middle-class. Among the factors most responsible for this rapid motorisation is the availability of relatively attractive financing options.
The change again has been made possible by the new-found alliance between the car-maker, the dealer and the financier. The fall in interest rates and the juggling of margins between the trio has enabled the car buyer to bargain for lower monthly repayments.
The recently announced alliances by Maruti Udyog Ltd (MUL), the country’s largest car manufacturer, with State Bank of India and its associate banks is another attempt at taking vehicle financing to the masses. The tie-ups also gel with the company’s plans to increase its focus on the rural market, where the demand for Maruti’s entry-level car could increase with the availability of cheaper financing
