Learn about the different types of car finance
Are you considering getting yourself a new set of wheels? Whether you want the latest, most stylish sports car, an off-road adventure SUV or a simple run-around to get from A to B, auto finance is your best bet. There is a selection of car finance options at your disposal. Read our blog to understand each one, and discover which is the most suitable for you.
Fixed & variable rate loans
A fixed rate loan is an interest rate that does not fluctuate throughout the duration of the loan. A variable interest rate changes according to the prevailing interest rate, ultimately causing fluctuations in your monthly payments.
Fixed loans will ensure your payments are set, allowing you to budget accordingly. However, it is important to note that if you make extra payments and pay out the loan early, you may be obligated to pay an early termination fee. Furthermore, you will also have to pay account charges.
In the case of secured loans, you offer an asset as a means of security. This means that if you fail to make the required repayments, the lender is legally permitted to repossess or sell this asset as a means to get their money back.
This type of loan is commonly used for used cars. Unlike secured loans, there is no need to offer an asset as collateral. The difference, however, is that the amount you can borrow will most likely be less than that of a secured loan.
The reason for this is the risk of non-payment is greater since there are no consequences. What’s more, the interest rate for unsecured loans is usually higher than for a secured loan, acting as an additional incentive to repay.
It is also important to note that while you may not provide an asset as collateral, the lender can take you to court to recover their money.
The novated lease is an agreement between you, your employer and a financier whereby you select a vehicle and your employer pays the lender out of your salary.
Please note: All costs associated with the day-to-day running of the car will be covered by you. What’s more, in the event you part ways with your employer, the car will become your sole responsibility.
This method involves you leasing a car from a finance company, whether it’s for your personal or business use. You don’t own the car, and at the end of the loan term, you can opt to buy it or return it. You are obligated to pay a monthly repayment while still being responsible for the maintenance and upkeep of the vehicle. Finance leases carry relatively low fixed interest rates because the finance is secured against the vehicle.
Commercial hire purchase
A financier hires a car out to you on a long-term contract. The payments remain relatively consistent throughout the duration of the agreement, with the vehicle being transferred to you once all payments are complete.
A chattel mortgage is a fixed loan whereby the lender will advance you the money for the vehicle and then hold a mortgage over the car, using the car as security. The difference between the chattel mortgage and commercial hire purchase is that you own the vehicle straight from the time of purchase.
This is when your lender buys the vehicle you want and rents it to you. However, unlike a finance lease, the ownership remains with the lender, saving you the burden of any associated risks. When the agreement ends, you have the option of buying the car or getting another lease.
There are a variety of options that allow you to get your dream car sooner than later. A key part of the process should be selecting the right lender. They should be able to give you detailed background information and ample advice before you make your decision. After all, it is an investment.
Yes Loans offers car finance and a host of other finance solutions. We say yes more often and with our fast approval times, you will want to contact us today. Get in touch today and find out what we can do for you.