How to Finance a New Car for a New Driver
Getting your first car is a memorable milestone; you step ahead in adulthood, get a driver’s license, and now your freedom will be unprecedented. Many people find financing a car to be a considerable financial strain, and choosing the best approach to finance your vehicle can be difficult. However, getting a car is quite expensive; that is why you must plan and get a car that is the most affordable, economical, and has cheap rates of car insurance for new drivers like the Old Nissan Sentra. You can also take a defensive driving course that would benefit you on the road and decrease our auto insurance rates.
Financing a New Car
As a new driver, finding an appealing yet reasonable car may seem difficult, but the car financing option helps you make your dream car a reality. The cost of a car is broken down into a down payment and a series of monthly payments. Car financing isn’t just one service, but it contains multiple options for you to choose from. Every option has its advantage and disadvantage. As a new driver, you wouldn’t have a lot of cash in your hand to get a car, but you don’t need to worry; Following is a list of some financing options with which you can easily finance a new car for yourself. However, it is suggested that you choose the option based on what would be the best suitable for you.
1. Taking a Personal Loan
In this agreement, you borrow the total amount at once from any institution and then buy the car and afterward keep paying off your debt in agreed monthly installments. Personal loans can be of two types, secured and unsecured. Getting a secured loan is more beneficial because its APR rate is relatively low, but if you cannot pay off the debt, then the lender has the right to confiscate the asset you have offered as security.
You’ll take this out in advance to buy the car outright then repay the debt in agreed monthly installments. However, to get this loan, you need to have a regular income and be over 18 years old.
One popular agreement that people usually go with is a lease. In this agreement, you have to pay a certain amount as a deposit following a fixed agreed amount as installments every month. After you finish these payments, you become the legal owner of your car. This agreement is only applicable to new and nearly new cars.
One thing that must be kept in mind is that, until the full payment hasn’t been made, the bank or the car dealer, or the loan company would be the real owners of the car. That makes you unable to sell your car until you do not fully own it, and if you do not pay more than two installments, then the owners, under whose name the car is still registered, can repossess the car. A lease is like a secured loan where an asset backs the loan. However, it excludes the worries of paying close attention to the APR.
3. Personal Contract Purchase
Another agreement with the help of which you can finance a new car is by personal contract purchase. This agreement is only available for new and nearly new cars only. Here you need to pay 20% of the total amount as the deposit and monthly installments previously fixed at a specific rate for three years, and after that, the final payment must be made. The final payment amount is agreed on at the start, generally known as the guaranteed minimum future value (GMFV). In the end, you can pay the guaranteed minimum future value (GMFV) and keep the car or hand it back, or you can part-exchange it for another new car. If you decide to hand the car back, then you would be owed no more money, but you wouldn’t get any penny of yours back, meaning the payments are un-refundable.
This agreement is just like a lease agreement, where the car belongs to the company until the final payment is made or the lease contracts end. However, if you end the contract early, you would have to pay the penalty because usually, the car is subjected to an agreed annual mileage limit with a penalty.
When Looking for a New Car
Whether you get a new car or an old one, buying your car at a young age can be challenging. When looking for a new car, you should always focus on a price you can afford. But the real problem is no matter what the price is, how will you afford it? Well for that you can purchase your car on finance. This way, you wouldn’t have to pay a considerable sum of money simultaneously, but you can pay in installments every month. It is an excellent choice for first-time buyers as they are not yet accustomed to the financial implications of owning a car.