Are you considering owning a car through a car loan? Well, this guide will help you to understand the main types of car loans. It is essential to apprehend different types of loans so that you can make a sound decision. Here are the main types of car loans you should check.
Commercial hire purchase
Commercial higher purchase is where a financier buys a vehicle and then hires it to a client over a given period. This type of car loan applies to both individuals and businesses. Generally, the monthly fee pays out the loan after the agreed time is over, and clearance is done. After that, the car is taken to the motorist. The chattel mortgages normally replace commercial hire purchase.
Characterized by low capital outlay.
It offers fixed repayments and interest rates.
It can be revised to suit the borrower’s pocket.
Its flexible payment model makes financing a car more comfortable.
With this type of car loan, the financier purchases the car and later leases it to a motorist. A finance lease is a model that offers immediate use of the vehicle with a reasonably low capital outlay. Such leases are accessible to individuals and businesses that want to use the car for commercial purposes. The buyer is responsible for maintenance and the trade-in residual risks of that car. After the lease period is over, the buyer can refinance, return, buy, or sell it for a residual amount.
Low or no capital outlay.
A motorist can start using the car immediately.
Repayments are tax-deductible, and GST is payable.
Fixed interest rates
The standard loan
The standard loan is also referred to as the bank or credit union. Usually, the financier lends the buyer the cash to purchase a new or second-hand car. This is the easiest of all car loans. However, you have to be financially prepared for additional costs. A standard car loan can be either secured or unsecured. In this case, the car will be the security for the loan. The financier will also want it fully insured.
The terms of payment are flexible.
Finance may include even on-road costs.
The agreement consists of monthly payments.
The interest is fixed and usually low because the car is secure.
Novated Lease is a three-way agreement where your wage is reduced in exchange for a car. You will directly lease the vehicle from your financier. Payments can be made through a novated agreement on your wage. All the operating costs of that car, including registration, insurance, and servicing, are covered by you.
You own it when the lease is over.
The car can be used for private purposes.
You have the freedom to choose the car you want.
Other types of car loans
In conclusion, car loan rates and deals vary from one institution to another. Therefore, make sure you choose a model that suits your budget.