Which Vehicle Financing Option To Choose


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There are many different options in the market when it comes to vehicle financing. Gone are the days when financing only meant getting a loan with sky-high interest rates and not too many options on how repayment works. Today, not only do we have a diverse variety of financing options, these options are often tailor-made to meet our specific needs. Customized home loans, car loans, bike loans, have made it easier for us to make investments and get it financed smoothly. Having more options make us feel powerful and in control of making the right decision and not settling for something that we did not want in the first place.

Whenever someone thinks of buying a car or any other vehicle, the first thought that crosses their mind is how much disposable income do they have and how much more can they afford to pay in the form of installments. This very question covers three very important aspects of financing: affordability, availability of finance, and interest rate.

Vehicle financing offers future vehicle-buyers options that extend far beyond the straightforward vehicle loans. These options include hire purchase and lease agreements or lease financing. Let us look at these two options to get a better understanding of each, so that when the time comes for you to get vehicle financing, you already know which one suits you the best.

Hire purchase method

Car financing optionsIn this method of financing a vehicle purchase, the buyer agrees to pay the amount in parts over a certain period of time. During this time the ownership of the vehicle stays with the owner or dealer who has made the sale.

The transfer of ownership from the seller to the buyer occurs only when the last payment is made by the buyer. In case the buyer is unable to make the payments and defaults on it, then the seller has the right to repossess the vehicle. This method of vehicle financing is good for consumers as they can spread out the expense on such a valuable item as a car over a long period of time, thus protecting them against a huge cash outflow.

For sellers and dealers, this is a beneficial scenario as the taxation of goods under the head of ?Hire-Purchase? in the book of accounts gives them certain tax benefits. This method of financing is a win-win for both parties.

Vehicle leasing

This is one of the upcoming methods of vehicle financing in the market. Comparatively easier and cheaper to obtain, this model is based on the agreement that the seller leases the vehicle to the lessee for a certain amount of time for an agreed upon price. The term for which the vehicle is leased can be anything between two to four years. After the expiry of the lease term the lessor gains possession of the vehicle for the purposes of disposal, or for leasing it to a new lessee.

Vehicle financing through leasing is beneficial for both the lessor and the lessee. In this arrangement the lessee has to pay a lesser amount than what he had to shell out had he taken a car loan. It is also easier to qualify for a lease financing than qualifying for a car loan. For the lessor, who is in essence the seller still holds the ownership of the vehicle and can lease it again to a new lessee. This arrangement also has tax benefits that the seller can enjoy.

These new options of car financing or vehicle financing as a whole, have made it possible for many to own a car. Know your vehicle needs, understand the affordability angle, and choose the best financing option to help you get into the driving seat, fast.

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