Financing a New Automobile: Three Viable Options

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Have you had your eye on a new BMW or Renault?  There is no time like the present to get behind the wheel (with the price of petrol constantly rising), and borrowing rates are as low as they’ve ever been.

Most car dealerships would have you finance your new purchase through one of their in-house financing options.  More often than not, the terms that are offered by the in-house financial institutions are unfair, placing crippling conditions and riders on your financing agreement.  This practice has existed within automobiles for years, and it doesn’t look as if it’s about to change.

Rather than obtain financing through a dealership, here are three other options that are fair and much more beneficial to you:

1. Personal Loans – Many people don’t realize the many advantages that a personal loan offers you versus an automotive loan.  Unlike an automotive loan, a personal loan can be applied to whatever purchases or financial commitments you want.  If the price of the vehicle that you want to buy is £10,000, you could take out a £12,000 personal loan to cover the cost of the vehicle as well as any repairs or modifications that it may require.

There are many lenders that offer you personal loans, though we recommend Northern Rock as the entire application process can be done online, and their interest rates and payment terms are quite competitive: around 6.5% APR, and up to £25,000 available to be borrowed.  As well, the loans offered by Northern Rock are fixed interest, making it much easier for you to pay down the loan over time.

2. Line of Credit – Obtaining a line of credit for the value of the vehicle offers you several advantages: you can pay off the loan as quickly as you want, as a line of credit operates in a similar manner as a credit card; you can put other expenses, such as a tune up or new tires, on your line of credit; a line of credit is always revolving, meaning that you can always reuse the credit that you have paid off if necessary.

Talk to your bank about your options when it comes to lines of credit.

3. Bank Loan – Automotive loans are quite common, and your bank will have many options available to you if you choose to use one.  Not all automotive loans are created equal, so make sure that you are informed about your interest rate, interest type, payment options, any balloon payments (if applicable), and early payment penalties.

Generally, the faster that you can pay off the loan, the better.  Ask if you are able to pay the balance of the loan early without penalty.