Buying a car is not a simple task, it can be a stressful and often difficult situation. You have to spend weeks deciding on the type of car you want, if you want a new or used car, and the brand that would be best suited to you. Tools like Mississauga Used Cars do help with the process of finding the right dealer and choosing your perfect car but they cant help you with the most difficult part of purchasing a car, paying for it. Choosing the correct payment option can make the difference between your car being a necessary tool in your day to day life and a burden that places not only financial, but also emotional stress on you. There are many ways to pay for a car, the cheapest option being to pay for the car upfront and in cash. This method of payment often allows the buyer to save money on their purchase as the dealer for the car adds discounts to the total price of the vehicle. Since however this option is not fiscally viable for many people, another great option is financing your vehicle.
Financing is the option to either take a loan to pay for the car upfront and subsequently pay monthly instalments to pay off the debt or agreeing to pay the dealer a certain fixed amount for a varied number of years instead of paying the entire cost upfront. There are many ways to finance a car, some of which include buying a car with a personal loan, doing a hire purchase agreement, using a personal contract, or leasing the vehicle.
Using a personal loan is one of the most common ways to finance a vehicle. To use the personal loan method of payment, the buyer must get a loan from a bank such as RBC, TD or Scotiabank, or a finance provider such as Auto Finance Canada and Canada Drives. This option however requires the buyer to have a prime credit score. As any score between 661-780 is considered prime, this option is not for everyone. Taking a personal loan from a bank also means that the buyer would have to pay back not only the loan, but also interest. This interest is different for each bank and can be calculated using the APR (Annual Percentage Rate). This option allows the buyer to spread the cost over several years, though the amount of money paid in interest also increases with the length of the loan term. The interest rates on cars also varies by how old the car is, newer cars having a lower rate than older ones. This means that an old car may cost more with premiums than a new car. A personal loan is also one of the easiest ways of acquiring the capital for the purchase, assuming the buyer has a good credit score. It can be arranged over the phone or internet unlike many other types of loans. This loan also covers the cost of the entire car.
Doing a hire purchase agreement is also an option when it comes to financing a vehicle. This method of payment is arranged by the dealer of the vehicle, making it an easy and convenient option. This method usually requires the buyer to deposit a certain percentage of the cost beforehand, and then requires monthly payments. This type of loan is secured against the car, meaning you don’t own the car until you have paid the final bill. This method also has interest that the buyer must pay, though it can be lower than bank loans. The term of payment is also flexible in this option. Many dealers listed on the Mississauga Used Cars website do offer their own purchase agreement financing options at very good interest rates if you do decide to do with this option.
Another type of payment option that is like hire purchase agreements is a personal contract purchase. Although this loan is for cheaper monthly payments than hire purchase but usually cost more in the long run as the term and interest rate are often longer and higher than other loans. This option however allows for the buyer to do things when the term is over that other options do not allow. Once the term ends the buyer can trade the car in and start over with a new vehicle. They could also give the car back to the dealer and pay nothing, or they could make the final payment, the balloon payment and keep the vehicle, though this option is not very practical as the balloon payment can tend to be about half of the actual cost of the car. This option also comes with conditions, such as mileage conditions where the driver cannot exceed a certain number of kilometers in the car, or damage conditions where any damage to the car must be paid by from the buyer.
Another method of purchasing a vehicle is by leasing the car. Leasing a car is the cheapest option from the yearly monthly plans as leasing is equivalent to renting the vehicle. This mean you never own the vehicle and are simply renting it for an extended period of time. This means that the total monthly cost can be as low as half of the normal monthly costs. This form of payment also comes with a mileage condition as the car is owned by the dealership and they require the car to not be driven more than a certain number of kilometres a year. Since you aren’t purchasing the vehicle, you also don’t have to worry about the vehicle depreciating in value, as the car will be returned at the end of the term. This payment option is also flexible with the length of the term but can sometimes have restrictions that other financing options do not have. If the buyer wants to keep the car at the end of the term, they can pay the rest of the cars value and can keep it, but most drivers choose to renew their lease with a new vehicle when their lease is over.
In conclusion, buying a car can come with a lot of challenges, especially for the first-time buyer, but knowing the different pros and cons of each method of financing can help reduce the amount of stress placed on you and can be the difference between regretting or loving your purchase.