Finance

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Finance

CAR FINANCE-THE DETAILS

Statistics show that around 65% of the estimated 450,000 new and used cars sold each year are bought with the help of some kind of finance plan.And with the interest rates so low,there has never been a better time to buy that new car or van.
There are four main types of finance plan:
Car loan
Hire purchase
Leasing
Personal contract purchase

CAR LOANS
Car loans are personal loans from a bank or finance company to enable you to buy a vehicle.You borrow the money and agree to repay it,with interest over an agreed period of time,usually a maximum of five years.Full ownership of the vehicle is yours from day one.
Banks and buildind societies offer car loan approval before you set out to buy your car,so you are negotiating as a cash buyer.Loan approval is usually good for three months for you to make up your mind.The typical monthly repayment on a personal loan is E32 per E1,000 borrowed over a three year period or around E21 per E1,000 borrowed over a five year period.

HIRE PURCHASE
Hire purchase is the most popular method of getting the vehicle you want.You decide on the deposiy you want to pay and the term over which you want to spread your repayments.
Then, you make regular fixed repayments over the agreed period.Capital and interest charges are included in your repayments and at the end of the period the car is yours to keep.
A variety of repayment periods are available to a maximum of 61 months,though most dealers will only offer a 36 monrth repayment plan.Under this option,the title to the vehicle is vested in the finance houseuntil the customer makes the final repayment.
Hire purchase can be used to finance both new and used vehicles,normally less than five years old.If you wish,you may defer a balloon payment to the end of the agreement.This results in lowerr monthly repayments,though it applies to new cars only.And instead of making the final balloon payment you can trade in for a new car or van,though the trade in value may not match what you owe.
Hire purchase funance is what you will be offered by most new car dealers.With the balloon paymentsheld back to the end,your monthly repayments are much lower than with a banl loan for the same term.However on a E17,500 new vehicle,HP finance over three years costs around E1,000 more than a personal loan.
If you stop the HP payments,they take back the car.With a personal car loan,you own the car from the start.

LEASING
This is another option where the bank or finance company lease the vehicle to you at a fixed monthly rental for a fixed term.The bank or finance company own the car and charges you for its use.At the end of the lease,you may continue to to lease the car at a nominal yearly rental.This method is mostly used by business.

PERSONAL CONTRACT PURCHASE P.C.P.
The final optionis personal contract purchase.This is a flexible hire purchase agreement that defers part of the purchase cost to the end of the agreement.This form of car finance appears attractive at first sight,because the monthly patments can be quite low.
However,according to AIB,that is because you are only buying part of the car.And at the end of the term,you will have only a limited amount of equity in the car to put against another car purchase.
You have three options at the end of the personal contract agreement:
(1) You can decide to keep the by paying the agreed minimum valuation.
(2) You can select another new carby taking out a further personal contract agreement.The existing agreement will be settled when you trade in the car for replacemant,the remaining equitycan be put towards a depositon the replcement.This is of benefit if you like to drive a certain new model every two or three years.
(3) You can retuen the carwithout incurring any further costs,subject to mileage and conditions.