-your ideal vehicle financing option-
If you’ve been dreaming about a new fun little hatch, but you don’t have the cash to buy it upfront then you might opt for an auto loan from your personal financial service provider who you know and trust, instead of taking a risk at a dealership you are not familiar with. We are here today to discuss auto loans as a vehicle finance option and everything that goes along with this option for our audience.
What is an auto loan and how does it work?
An auto loan is a loan taken out by a financial service provider or financial institution to individuals who want to purchase a vehicle immediately but don’t have the cash to pay for the vehicle upfront. An auto loan is also a secure loan and is structured as an instalment loan which means that the individual gets a fixed amount of money usually the value of the vehicle they wish to purchase, and they need to repay a fixed amount every month usually the value of the vehicle plus interest divided into the amount of months they will be paying back, usually between one and seven years. The vehicle is also used as the collateral in case the borrower can’t repay the money.
Advantages and disadvantages:
Auto loans are great because the individual has a choice of comparing multiple rates from different financial service providers and financial institutions and get to choose the one that works best for them. This is perfect if you already have your eyes set on a specific vehicle, new or pre-owned (depending on how much money you qualify for at your service provider or financial institution) at a certain dealership, instead of scouting other dealerships for ideal rates and having to give up the vehicle of your choice to settle for something else, you can pay in cash for the vehicle and simply pay off the financial service provider or financial institution.
Another major advantage of opting for an auto loan to finance your vehicle instead of a dealership, is that when you pay the dealership you, own the vehicle the moment you put the money down. This allows you to modify it any way you wish as long as it’s legal, but if you have a service plan or vehicle insurance, then you should consult with them first about this modification and receive their approval before you go forth with it.
It also offers the individual peace of mind if you are a bit sceptical about the dealership, but you trust the financial service provider and financial institution not to pull any tricks or catches in the fine print, and you get to improve your credit score thanks to this auto loan.
The only real disadvantage of an auto loan is that it is usually more expensive due to a high interest rates and repossession.
The best thing to do is to always ask around and receive as much quotations, and rates from different dealerships and financial service providers before settling on one vehicle finance option that might leave you disappointed and unsatisfied in the long run.
Written by: Ashley Roos
Edited by: Pearl Mwale