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April 25, 2022
by Ella Watson
As you know, there are multiple car financing options, and it can be daunting to choose the best one. You can finance it either from a direct lender or directly from a car dealer. Whatever the option you choose, make sure you do not rue the day down the line. As car financing options are secured, you will likely get a deal at an attractive interest rate.
However, there are still so many things you need to look into before landing a decision. First off, there are various types of financing deals, so you must know about all of them. Take a look at the following table:
| Lender Financing | Dealership Financing | |||
|---|---|---|---|---|
| Personal loan/ Auto loan | Hire purchase | Personal contract purchase | Contract hire | |
| Security | Yes (your car) | Yes (your car) | No | No |
| Deposit | 10% | 10% | 10% | Three months rental in advance |
| Payments | Monthly instalments (principal and interest) | Monthly instalments (principal and interest) | Smaller monthly instalments (interest only) | Lower monthly payments (leasing payments) |
| Balloon payment | No | No | Yes | No |
| Ownership | Complete ownership after the term’s end | At the end of the term | Optional | You will have to take it back |
| The right to sell | Yes, but you have to settle your finances. | Yes, but with the lender’s permission | You can sell it privately to pay off the balance. | No |
| Repossession | In case of default | In case of default | NA because you are hiring the car | NA |
Now you have got to know how each financing deal varies. The next step is to know the ways to get the best car finance deal in Ireland.
Compare deals
Whether you look for an HP or a PCP deal, the first thing is to compare the deals to make a decision. Various websites can tell you the deals offered by car dealers. You can get a quote without any fees and without losing your credit score.
Since you can compare the deals on each car side by side, you can easily see if the car has the features that you are looking for and meets your budget. If you are looking for financing from a lender, you should seek a pre-approval letter from multiple lenders. This will not affect your credit rating, but you will find the most suitable deal.
Submit a higher deposit size
To grab a financing deal, you will have to arrange a deposit of up to 10% of the market value of your car. You should try to increase the deposit size up to 20% to avail yourself of lower interest rates.
If you seek bad credit car finance, you will need a higher upfront cost, which will help you get a deal at a lower interest rate. Car financing can cost you an arm and a leg if your credit history is not good. You can mitigate its worse impact by increasing the size of the down payment. However, you will have to choose a lender that entertains bad credit car buyers.
Understand APR and associated fees
APR refers to annual percentage rates. Most buyers assume that APRs and interest rates are the same. However, the former involves interest rates for the whole year and processing fees. It is not fixed because it depends on your previous payment records and repaying capacity.
It may be between 5 and 10% for good credit buyers, while it goes up to 20% or even more for bad credit borrowers. It can affect the size of monthly income. Therefore, you should carefully check your monthly payments to ensure you will not struggle with payments.
You can choose a longer contract to reduce the size of monthly payments. However, this will increase the total cost. Hire purchases, and personal contract purchases will be more expensive than auto loans because of associated fees.
If you fail to stick to the agreed mileage limits and keep the car in good condition, you will have to pay additional wear and tear costs. A personal contract purchase requires a balloon payment at the end of the contract. As soon as you make the payment, you will get the title of the car. However, it does not seem to be a very cost-effective financing option if you want to own it.
If you are taking out a personal loan with a lender, be careful about processing fees and hidden fees that will be levied on you. Be updated about early repayment fees and late payments. These fees can increase the cost of your auto debt.
Each type of financing deal is subject to some fees and charges. You should know about them at the time of making a decision.
Consider buying a cheaper car.
Buying a cheaper car can save you a lot of money. One of the advantages of buying an inexpensive car is that your down payment will cover a large proportion of the market value of the car. As a result, your loan-to-value ratio will whittle down.
Another benefit of buying a cheaper car is that sometimes you do not need to borrow a large amount of money. In that case, you may take out small loans in Ireland.
The bottom line
If you have decided to buy a car, make sure you have mulled over all car financing deals. Each of them has its own pros and cons. You should carefully weigh them up before making any decisions. Choose a deal that suits your budget.
