Purchasing a car requires knowing the different options available to buy it in the savviest way. That said, there are essentially three main ways to purchase a vehicle, which include:
Pay in Cash
Paying in cash is the cheapest and probably least stressful option for purchasing a car because there is no lender to deal with, no interest to pay, and no monthly installments, so you can enjoy the pure freedom of owning your ride.
Take Out a Personal Loan
With a personal loan, you are required to pay interest and monthly installments; however, if you use it to purchase a car, the loan is unsecured, so you are not required to use the vehicle as collateral.
There is also often a shorter repayment period because it is considered a high-risk loan.
You may also only qualify for a low to moderate loan amount, so it may be best for vehicle restoration after purchasing a cash car from a private seller.
Apply for an Auto Loan
An auto loan also requires you to pay interest and monthly installments as part of the loan agreement; however, it is a secured loan, so it typically has a longer-term period and lower interest rates, which helps make your payments more manageable.
It must also be used specifically to purchase a vehicle with the car as collateral. This way, if you miss a monthly payment, the lender can repossess the car and resell it to recoup any losses. You may also need a down payment.
There are various types of auto loans, including:
Used Car Loan
If you are purchasing a car that has been previously owned, then you may consider taking out a used car loan. You can apply for a used car loan through lenders, auto dealers, and online banks, and they also require monthly payments with a payback period of about 3 to 5 years. The used car’s value will usually dictate how much you can qualify for.
New Car Loan
If you are looking to finance a brand new car, you may consider applying for a new car loan, which the dealer can help you with. Or you can seek new car financing elsewhere for better loan terms. For instance, you may research a revolving line of credit to finance your new car.
This way, you can use it to purchase your new car and any future cars for as long as your account is active; in case you are wondering how long does a car line of credit last. In the meantime, new car loans have a repayment term of 3 to 5 years, and your monthly installments are determined by the loan amount, interest rate, and loan period. They also usually require at least a 20% down payment.
Lease
A car lease can also be used to finance your car. This way, you only make monthly payments on the vehicle for as long as you use it, which lowers your installment costs. However, there are also often various other fees and costs involved with a lease, so be sure to read the fine print. You can also apply for a lease buyout loan at the end of your agreement to take full ownership of the car while continuing to make the same monthly payments.
Private Party Auto Loan
A private party auto loan is offered by banks, credit unions, and online lenders to enable you to purchase a car offered for sale by a private owner. However, the car typically has to be no more than 10 years old and have under 150,000 miles to qualify.
Auto Refinance Loan
An auto refinance loan enables you to swap out your current auto loan for one with a longer term, lower rate, and lower monthly payments, provided you have a new and improved credit score. You can also refinance your car to get a cash sum equal to the equity in your car,
also known as a cash-out refinance loan, which can then be used for emergency car repairs and more.
Now that you know there are many ways to buy the car of your dreams, hopefully, it can help you make the choice that best suits you for greater pride and achievement in your investment.
