Car Financing: Is It Worth It?

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The amount of people who choose to pay for their car with finance options is increasing all the time. We all struggle with big one-off purchases, and the ability to pay over months and years is a very attractive one. However, there are positives and negatives to doing so. Getting the right deal is all about knowing what to look for. If you can’t do this, you could end up in a seriously bad financial state.

Understanding Interest Rates

When buying a car on finance, you need to think about interest rates. Different dealers will offer different amounts of interest that you’ll have to pay back as part of the deal. You’ll need to make sure you’re getting something that you’re able to repay over time. Don’t be tempted to rush into a deal without understanding exactly how much money you’ll be required to pay.

What Type Of Car Do You Want?

Financing a car doesn’t always give you as many options as you might like. In particular, buying a used car often doesn’t come with finance options. There are a few exceptions, such as websites like www.GMTAutoWest.com/custom/used-nissan-models-st-charles. If you want something flashy and brand-new, this is where finance can be particularly effective. You’ll be able to get the latest and greatest models for an affordable cost.

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Thinking Long Term

If you’re the type of person who loves to change cars all the time, finance probably won’t be for you. You could be paying this purchase off for up to five years! You can’t suddenly change your mind after a year and go for something else, or you’ll lose lots of money doing so! Think about whether you can deal with having the same car for a long period of time.

Credit Rating

If your credit rating is poor, you might as well stop thinking about getting a car through finance right now! For a company to trust you with something as valuable as a car, you’ve got to have a great credit score. If you haven’t got that, you’ll be turned down. Take steps to improve your credit rating now, and you might be able to get a deal later down the line. You can use websites like http://www.forbes.com to help you with this.

Getting The Best Deal

Posing the question of whether financing a car is worth it comes down to the deal you can secure. There are all sorts of finance deals, and picking the right one is an art in itself. Do plenty of planning before you enter into any commitment. Read up online for reviews of the car you’re interested in purchasing. Just like when buying a car outright, you won’t be getting a good deal unless you take proper care to find it.

So, is it worth buying a car via finance? It all depends on your situation. Go back through the tips we’ve mentioned today and see what category you fall into. Financing can be a fantastic way to purchase a car for some people, and not so much for others. There is no correct answer here; make your decision wisely!

Photo credits:

By Ildar Sagdejev (Specious) (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 4.0-3.0-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/4.0-3.0-2.5-2.0-1.0)], via Wikimedia Commons

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A beginner’s guide to car leasing

family_carSupplying your workforce with a company car can be a costly business, but one way to reduce that expense is leasing. While buying a fleet of cars means tying your business to a contract or hire purchase arrangement, leasing offers more flexibility. Contract hire and finance leasing are among the options, with a different set of tax breaks to consider.

Typically a leasing policy could see a vehicle hired for the duration of the contract fall under your company’s ownership by the end of the lease period – usually three years or 60,000 miles. And although some packages come with strict terms that cover car maintenance, a maintenance contract can be added to the monthly cost of a car lease, to make caring for your car hassle-free, especially for high-mileage vehicles (check out What Car’s guide to maintenance packages here).

If you’re thinking of leasing company cars, here are the plans to consider. As The Daily Telegraph points out, you could make substantial savings.

Contract hire

Probably the most popular form of leasing company cars. A vehicle is leased with a mileage cap and for a fixed time frame, after which the car is returned. An up-front fee, usually of three months’ rental, is paid, followed by monthly payments for the duration of the lease period.

Pluses? The company sidesteps the risks of owning the vehicles, such as a lower than anticipated resale value, while maintenance costs are often taken care of. However, that could mean the company misses out if a car has a higher than predicted resale value, and that cheaper maintenance options are unavailable.

But the biggest draw is that the car is never owned. Therefore it can be claimed as a business expense in tax returns.

Finance lease

Rather like buying a car personally using a finance deal, this arrangement means you ‘buy’ the car for a set period by paying off a loan month by month. These monthly payments can be reduced should you opt to pay a larger chunk at the end of the lease period. At the end of the deal you have the option of paying a small fee to keep the vehicle on – although you still won’t technically own it.

A portion of the charges your company pays can be offset against tax.

Hire purchase

Just as if you were making a personal purchase, this is a straightforward plan that begins with a deposit and is completed by paying a certain amount each month until the car becomes your company’s property. Since the loan is secured using the vehicle, it stands to be repossessed should you fall behind on payments.

Any depreciation and the interest on the fees you pay can be claimed against tax.


Contract purchase

This is a lease combined with a service fee for maintenance, which the leasing company carries out. After a set number of the monthly payments, as well as one larger, final payment, the vehicle becomes the company’s property. It can then be sold back to the leasing company at an agreed price.