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Having a car can be a necessity when time is short, and you don’t have the time to travel on public transport. Now, when it comes to buying an actual car, you need to get an auto loan, which is also known as car financing.

Here are a few things that you should know about car financing as a first-time car buyer.

Keep reading.

Buying A Car With Car Financing

Most car buyers buy a car with the help of car financing. Now, the reason why they buy the car on loan is because they don’t legally own the car during the term of the agreement that the finance company does. However, certain types of car finance do eventually pass over ownership to the car buyer once they have made all of their payments.

You can get car financing for any age of the car, but the rates can be more favorable for new cars. The underlying reason for this is that many car manufacturers provide something that is known as deposit contributions.

Essentially, car manufacturers reduce the amount the car buyer has to pay upfront as an incentive to choose their car.

Buying With Cash Can Cost You More

If you want to buy a car with cash that you have either borrowed from a bank or saved from your earnings, you gain one big advantage, which is that you get to own a car from the very outset. However, you should bear in mind that the total purchase price will usually be slightly higher, as dealers can often give better savings when they sell a car on financing.

On that note, while dealers might offer larger savings for cars with finance, yet due to the interest you have to pay, it can still work out more expensive in the long run than buying a car with cash. Also, you should closely assess the agreement and look for any penalties that might be attached to it.

Signing A Lease Deal

PCH, also known as personal contract hire, which is also known as leasing, is a bit like renting a house. This aspect indicates that you agree to pay an initial deposit to secure access to the car. Subsequently, you proceed to pay monthly for its use over the period of the term, which is usually spread between one and three years.

In the end, you just give it back. Now, this route of getting a car might be suitable if you change your car regularly. During this period, you will be taking the car to the auto service center if you need to change oil or get it repaired. The thing is that you never get to own the car – and you may have to pay a penalty if you accidentally damage the car or go over any mileage allowance.

Everything about PCP

A personal contract plan, also known as PCP, is a little bit like an interest-only mortgage on your house. So, you pay an initial deposit and then smaller monthly charges over the period of the agreement. In the end, you can actually avail of the option of buying the car if that’s what you want to do.

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