The UK is in love with cars. Don’t believe us? The statistics show that there has been a continuous rise in sales of vehicles for the past 5 years.
Not only this, the car financing industry has also witnessed a tremendous growth because of this addiction of the UK towards buying new cars.
Buying a car on cash may be the biggest mistake that you make in your life. This is why car financing options are so popular in the UK. Though you can simply ask your bank to provide you financing for the car but there are other financing options that you can use. Here we have shed some light on conventional as well as non-conventional financing options.
This one is the plain vanilla among various other car financing options. Under this car financing option, you can simply take out a personal loan either from a bank, a credit union, a building society or from online loan providers and buy a car from it.
The advantage of this type of loan that it is easy to get and can even be availed online without meeting a banker at the bank counter. One thing that you should watch out is that you must never keep your home as collateral when taking out a personal loan otherwise you will lose your home if you are not able to service the debt amount on time. Losing your home for a car sounds idiotic so avoid making this mistake.
Hire Purchase Agreement
In short, the car is collateral and it will be transferred to your name once you’ve made all the payments. This financing option is also fairly common in the UK. The advantage of this option is that you do not have to keep any other security or asset as collateral and the car itself serves as the collateral. For availing this car financing option, down payment must be made. The higher the down payment the lower will be the rate charged by the lending institution.
If you are a financial wizard you will be choosing this option. Under this financing option financial institution will buy the car and will lease it out to its customers. Customers will be making monthly instalments but at the end of the period, the car does not belong to you and will be returned back to the lender.
What?! Returned back? This may sound like an option worthy to be sneezed off but if you notice and analyse you will realize that the resale value of the car would decline after you have used it for 5 or 7 years and there may be new and improved models in the market. So why would a person like to own out of date car after paying his/her instalments? Thus many customers who go for this type of financing will return the car back and will take out another new and improved car.
There are many more car financing options but the above ones are most common in the UK.