Car Finance

Car Finance

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Owning a car is perhaps one of the most important factors of adulthood. The process of getting your permit and then your license as a teenager (or whenever) is exciting as it shows the first step of “growing up”. Although it is possible to live successfully without ever owning a car, it is clear that things are a lot easier when you do have one.

With that said, owning a car is a very expensive ordeal. With car insurance and gas, you’ll end up paying several hundred dollars or more per month just to keep the car running and legal – not to mention registering your plates, et cetera. Basically, owning a car is a rather costly affair.

Before you have to worry about any of that, however, you first have to get over the obstacle of actually buying the car itself, which is a large expense all on its own. The high prices of cars is often the reason why people end up without one. Luckily, there is a magical solution called car finance that will make buying a car ten times easier.

What is Car Finance

Car finance is any method of financing a car other than having the customer pay a full lump sum at time of purchase. There are many methods covered under car finance, although the most popular way is by taking out a car loan. Other methods covered are ultimately the same and make it so that the customer can make a down payment and pay the rest of the total over a certain period of time. This includes leasing. Like Car Finance

How Does Car Finance Work

When you finance a car, you are adding to the total cost of the vehicle. Because financing usually consists of a loan, you are paying for the interest and other loan costs on top of the actual cost of the vehicle. This can leave a person paying thousands more than what the car actually costs.

Car Finance with a Loan

When financing your car by way of a loan, there are several things you should keep in mind. The first thing is the amount of the loan – a.k.a. the amount of the total the loan will cover. This is usually affected by your down payment. Other factors are the interest rate or annual percentage rate (APR) and the amount of time you have to pay back the loan.

Car Finance with a Lease

By leasing a car, you only pay for the amount you will use the car and not the actual total the car costs. You also pay various leasing fees. A down payment may or may not be required, and then you will make payments monthly. This is often less expensive than financing a car by loan, however you will not own the car after the lease is up.

Choosing between a lease and a loan depends on what you want out of your car. If you like to update your car frequently and would rather not have the same one for a long period of time, then leasing will likely be the best option for you. Otherwise, taking out a loan will help you gain equity because you will own the car when the loan is paid off.

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