When you buy a car, a dealer usually offers you the option to pay in cash. It helps you buy the vehicle outright. However, it is challenging to buy a car in a lump sum. It could be due to low income, high car purchase rates, or limited savings. Thus, car finance companies help individuals by providing finance options.
There are 4 core options to split the car purchase payments. These are a hire Purchase, a personal Contract Purchase, or a Personal Leasing or a Personal loan. Each option works differently. Thus, individuals can choose one depending on financial flexibility, income, preference, and budget.
Additionally, the type you get depends on your credit score, deposit, or guarantor requirement. The blog discusses the best car options to choose from.
Understanding Car Finance
As mentioned above, most individuals use different car finance arrangements. The provider analyses credit score, payment history, income, residential proof, and driving license. It helps them analyse the amount you can afford to pay.
You must pay the dues in equal monthly instalments until the repayment term. After that, you share the option to buy the car, change it or lease another for more years. You can buy the car by paying the balloon payment.
Types of Car Finance and tips to choose one
Different types of car finance may suit different needs. For example, a new driver may benefit from purchasing a used car on finance. It is easier to get one than a new car. Moreover, it is affordable on the budget. PCP can be ideal for you. Under this, the owner retains the car ownership until the borrower pays the dues. Afterwards, the borrower can buy or return the car. Here are some crucial car finance types to consider:
1) Hire Purchase
Hire Purchase allows you to hire a vehicle from the dealer. The individuals make monthly payments according to the interest and car costs. The agreement allows you to spread the car costs in easy instalments. You get the ownership after paying the final instalment. Splitting the payments makes the car purchase affordable.
You can reduce the monthly payments and interest costs by paying a deposit. The deposit requirement is low and is ideal for individuals with minimal income. However, missing payments or defaults lead to losing the vehicle.
Car dealership companies prefer individuals with a better credit history. However, it does not limit the chances of one without one. You can get car finance with bad credit in Ireland, as the vehicle serves as collateral on the loan.
However, you may only get one if you have stable finances. The creditors check the recent credit report. You may get it if it reveals low debts and debt-to-income ratio. Still, you can boost the chances of getting one by:
- Paying a high deposit
- Improving your income
- Paying some debts
- Choosing an affordable car or a used one
Ideal for-
- It is ideal for individuals with regular but low-income
- You may benefit if the car price rise
- You want to own the car at the end of the agreement
2) Personal Contract Purchase (PCP)
Like a Hire Purchase agreement, one can spread the car costs in easy instalments. However, it is cheaper than the HP agreement. After an agreement, the individual shares the flexibility. He can either buy the car, replace or return it. Plan for the balloon payment to own the car later. It could be high and require saving enough.
It allows individuals to drive a new or used car without paying upfront. Under this, you only pay for the depreciating price rather than the whole. However, it has certain mileage limits.
You cannot drive the car beyond the restricted mileage. Moreover, you must pay the maintenance fee and repairs. These excesses make the cover costly. If the individual defaults, the lender may repossess the car.
Ideal for-
- Individuals who like to remain in trend with new vehicles
- Do not want to commit to a car for 4-5 years
- Want to benefit from low monthly payment
3) Personal Contract Hire (PCH)
Personal Contract Hire is a long-term car rental agreement. It requires paying the deposit and following the remaining payments in instalments. It does not allow to own the vehicle at the end. The only option is to return or switch the car. It is the primary difference between PCP and PCH. Moreover, monthly payments are cheaper than PCP. You must pay for the repairs and maintenance of the car.
The agreement comes with mileage limits. You cannot drive beyond a certain mileage. Otherwise, you may incur penalties.
It is ideal for:
- First-time buyers or car drivers
- Do not want to own the vehicle
- Change the car often
- You can pay the optional final payment
4) A personal loan
When you take out a personal loan, you pay it in instalments. One can use the loan for any business or individual needs. Similarly, you can use it to finance the car purchase. You can purchase through an unsecured or secured loan.
Most lenders offer secured loans to individuals. Under this, the car acts as a collateral. Alternatively, check options to purchase the car without pledging it as collateral. It may imply paying more interest.
You can modify the vehicle according to your needs. It does not restrict you there. However, it may increase your car insurance premiums. The interest rates stay competitive on unsecured loans.
Identify the best personal loan companies in Ireland for favourable rates. Individuals with high credit scores and income get instant finance. Moreover, you may get affordable terms and interest rates. Work on other aspects like- reducing expenses and ensuring a long rental or permanent residential history.
Ideal for :
- Have a good credit history
- You can pay for repair and maintenance
- Do not want restrictions on miles
- Have insurance cover
5) Leasing the car
In this agreement, you never own the car. Individuals and businesses can lease the car for 7-10 years. The charge depends on the car’s value, the length of the term, and mileage. You may pay less each month than other agreements.
However, the extra costs increase the overall amount. For example, you pay more for a car’s wear and tear. Some insurance companies may insist you take the gap insurance. It protects against the damage.
Ideal for:
- It is generally apt for businesses
- Can maintain long-term agreement payments
- Do not want to own the car
- Are ready to pay the gap insurance cover premiums
Bottom line
These are some popular ways to finance a car in Ireland. Choose one according to your needs, deposit potential, ownership needs, and credit score. If confused, consult expert advisors for help. They may assist you according to your personal situation. It may help you save for a deposit and buy the right car accordingly.
