Equipment and Car Loan
A car loan is a personal loan for the specific purpose of buying a new or used car.
You borrow an amount of money that you have to repay within a certain period of time (called 'the term'). You will have to sign a credit contract that specifies the amount borrowed and how you will repay it.
The term can vary, but is usually between 12 months and 5 years. If you don't pay off the full amount of the loan by the end of the term, or if you can't afford to make equal payments over the life of the loan, the final payment must be made as a lump sum. While this makes repayments affordable, you may be left with a large amount of money to pay off or refinance when the term ends.
Car loans are nearly always fixed rate loans, where the interest rate is locked in for the term of the loan. You will also have to pay fees and charges. A fixed rate loan offers the benefit of set repayments, so you know exactly how much you have to pay each month. But if you make extra payments from time to time and pay out the loan early, you may be charged an early termination fee.
You offer an asset, such as the car you are buying, as security for the loan. Secured loans are usually required for newer cars, because they are more valuable as an asset.
If you don't make repayments, the credit provider can repossess and sell your asset to get its money back (without going to court). The age of your car will affect its resale value. If your car is sold for less than you owe, you will still have to pay the credit provider the difference.
Unsecured loans are typically taken out for older used cars. You don't need to offer an asset as security.
You may not be able to borrow much on an unsecured loan. Interest rates are also usually higher, since the credit provider is taking a bigger risk. If you don't repay the loan, the credit provider can take you to court to recover its money.
A car lease allows you to rent a car for an agreed period of time, but you don't have the right or option to buy the car. At the end of the period, the lease is terminated and the car is sold.
You could make an offer for the car, but you will usually need to come up with a large sum of money to buy it - and the credit provider does not have to accept your offer. If you want to own the car, don't get a lease.
Get value for your money
Just as important as getting the best price on a car is getting the best credit deal. By shopping around for credit before you go shopping for a car, you can find a loan that suits your budget and circumstances. A finance broker will do the work for you to shop the best deal and rate for your circumstance without charging you a fee. If you have an inquiry for car loan, equipment finance or lease; do not hesitate to contact us to find out how we can assist you.