If you are driving an old wreck and in need of a new vehicle, you may need to know about car finance. Financing a vehicle allows you to drive a new or nearly new vehicle without having to come up with the money to pay for the car all at one time. Instead, you will make a down payment and then each month, you will make another payment until the vehicle is paid in full.
Due to the fact that interest is charged on money that is borrowed, you will pay more for the car that you buy than if you had bought the car and paid in full initially. The additional money that you pay is for the convenience of using someone else’s money. Most people are more than willing to pay for this convenience.
Several governments around the world are currently operating a scrappage program. In this program, the government pays a certain amount for older vehicles that are either less fuel efficient or cause more pollution. These vehicles will be taken off the road and scrapped. The money that is paid is often more than the vehicle is worth and can be used for a down payment for the loan for a new vehicle. The governments are using this program to both stimulate the economy as well as improve the environment.
The vehicle loan interest rate depends on credit rating. Credit ratings are a measure of your past history of paying bills on time. With a good rating, you should get some of the best offers for low interest on a loan. If your rating is not good, you will pay more in interest and may have to pay a larger down payment. If you start paying everything on time now, it will only take a few years to get your credit back on track. Perhaps, by the next time you need to buy a new car, your credit rating can be improved to the point that you qualify for much better rates.
The larger down payment required means that persons with poor credit ratings have more to lose if they default on the loan. Fortunately, a larger down payment will mean lower payments each month on the vehicle, so it may also make it easier for the customer to make the required payments each month.
Some auto manufacturers will have their own credit company. They finance the cars that they make. These companies often offer further rebates to customers that finance a new vehicle through the company, knowing that they will more than make up for the rebate in other fees.
If you own a vehicle that does not meet the requirements for the scrappage program for your country, it may be possible to trade that car as a down payment for the new vehicle. Even if you still owe money on the older vehicle, as long as it is valued more than what is owed, it may provide the needed down payment.
There is more than one way to finance a vehicle, so if you first attempt at car finance does not work, keep trying. As long as you have a good income, you may eventually get the car you need.
