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Posts Tagged ‘Finance Company’

Most of us need to buy a car since it is an important vehicle to transport us from one place to another. However, it is not a simple and easy thing to bring the car into your house. We all desire for the car, but our saving is another point to make us thought about. Therefore, getting car finance becomes one of people’s favorite solutions to choose. There are important points you should take into your consideration before getting sort of finance sources.

Online research is much helpful to give initial input of each finance resource type. Thus, it is kind of good way to save you time and money. There are a lot of websites established to help people who need to find financing company for their cars. Next, when the internet has provided all you want it is good to continue your step to a car dealer. Car dealerships also give facilities for people who need to get car finance. However, you have to take a note that before telling the car dealer about car finance options they might offer, you have to negotiate first the price of the car.

You also can apply for an auto loan which will be based on your credit scores. There are several options of the loan packages like business or personal packages with cheap car loan rates you can pick. However, right before you choose one of those options, you have to investigate the other sources for a car loan, for instance, your bank or credit union.

Considering leasing your car can be a good option as well, for car finance gives you the advantages which include low down payment and low monthly payments. Other than that, you will get to incur low maintenance cost with such car finance option, as maintenance expense will be covered by a warranty. Even so, first, you should compare which finance company that provides you each year with cheap low cost financing. In addition, discuss with them which payment you would like to take based on a consideration that the longer the time the lower the payments will be. To be on good terms with the payment mater, you can get the online quotes where various finance calculator tools are available for you. Next, you can compare and calculate those different payments easily.

Getting the car finance company is actually easy. It just sounds complicated at the beginning. Thus, if you still get confused to comprehend well what this article explained above, just ask some help to a specialist of commercial car loan. They will give good suggestions which car finance you can choose, whether Car Lease, Commercial Hire Purchase (CHP), Car Loan or Personal Loan. Add to that, car finance companies usually provide you a reliable application service. They even establish a sort of online comparison website to explain that your car loan request is the easiest, fastest and most affordable loan.

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You might think that used car finance simple involves a dealer, a bank or other lender, and a down payment on the part of the buyer. That is how it works in some cases, but it gets much more creative than that. Let’s look at a real life example, and see what lessons can be learned to apply to making money in other businesses.

A friend of mine used to have a used car lot. He teamed up with a creative used car finance company to sell cars to people who had trouble getting traditional loans. I don’t recall the name of the company, and I may get a few figures wrong, but I remember the principles very clearly.

A typical deal might have started with the dealer taking a trip to the auction. He would buy a car there for $1,200 (wholesale) which might have had a retail value of about $2,200. But because he is making it easy for somebody to buy the car, he can sell it for perhaps $3,000 after cleaning it up.

How does he make it easy to sell at a high price? By arranging financing for the buyer, who typically cannot get a bank loan. How does he do that? With a very creative finance company that rarely refuses to make a loan.

How can they make loans to people who are a terrible credit risk? By putting much of the risk onto the dealer and charging outrageous interest rates. Specifically, in this case, they would finance the $3,000 car at say 20% annual interest. But they also would only forward half of the loan amount to the dealer. The rest would be paid only when and if the payments from the buyer came in.

In this example, then, the buyer might have to pay a $600 down payment. A young couple can put together a couple paychecks to afford this. Payments on the $2,400 loan arranged by the dealer might be $200 per month. As I recall, weekly payment plans might have been available as well, to make budgeting easier for those with weekly or biweekly paychecks.

The loan would be for $2,400, but the dealer would get $1,200 when the sale was made – half of the loan amount. As you can see, the dealer is already okay, since he has received a total of $1,800 for a car that cost him $1,200. In other words, if he receives nothing more he may be able to squeeze a profit from these deals even after overhead costs.

What about the used car finance company? So far they have only risked $1,200, on a car which is worth that much at a wholesale auction. They collect 20% interest on the entire $2,400 however, as well as some kind of “loan processing fee” up front. This makes their real rate of return over 40% annually.

Of course, these are high-risk loans. I heard through the grape vine that 50% of these loans were in default at some point. But the finance company had an aggressive collection team, which called borrowers as soon as they were a week late, and quickly repossessed cars when necessary.

What does that mean? As an example, suppose a buyer ran into trouble and stopped paying after the first eight payments of $200. The principle amounts had been forwarded to the dealer, but the lender would have already collected about $400 in interest and fees. When they took the car and sold it for $1,100, they might net $800 after the repossession fee and other costs. In other words, they broke even on the deal. When you make a 40% return on the good deals, you can break even on a lot of the others, right?

Used Car Finance Lessons

One dealer who had used this finance company was still receiving checks for principle years after he retired, so he liked the arrangement. Despite the high interest rate, the buyers now had a car to get to work in, so they liked the deal, or at least found it better than all other options. The owners of the used car finance company were happy making money where nobody else dared to loan. It was very creative all around, so what specific lesson can we learn to apply when making money in other businesses? Here are three:

1. High-markup products allow for more creativity in marketing and selling.

2. Making it easy to buy allows you to charge more for your product (or service).

3. Finding a way for everyone involved to “win” helps you make money.

There are other lessons in this story of used car finance, of course. For example, in the case of the lender you can see that going where others fear to go opens up new opportunities. Sharing the risk is also a useful way to make things possible that otherwise might not be. Of course, the buyers out there might see the lesson that you pay a lot more when you finance things, and especially when you have bad credit.

When buying a new or used car there are so many options now available. From personal loans to more specialist finance such as Personal Contract Purchase it leaves a lot of options for which to choose from. So what are all the options and which one is right for you.

Personal Contract Purchase

PCP is fast becoming a very popular method of car finance. You pay a monthly amount towards the purchase of the car and at the end of a pre-defined purchase period you can then choose pay a lump sum to buy the car or just return the car with no obligation. This style of finance is great for those people who like to change their car on a regular basis but do not want to pay the full amount for a new car.

Hire Purchase

This is the more traditional way to buy a car. You enter into a contract to buy the car over a certain period of time during which pay the car off in monthly instalments. At the end of this period the car is paid for and legally becomes yours. As a Hire Purchase is effectively a secured loan if you miss any payments then the seller has a right to repossess the car.

Lease Purchase

Lease / Credit Purchase is similar to a Personal Contract Purchase (PCP) in that a lump sum amount is deferred to the end of the agreement. This lump sum reduces the regular monthly payments and allows you to purchase a more expensive care than you thought possible.

Unlike PCP a lease Purchase offers no option to return the vehicle to the finance company at the end of the agreed contract period. It is up to the customer to settle the final balloon payment through additional finance, cash or part-exchange with the finance company.

Contract Hire

This is an agreement where a rental is paid in return for the vehicle over a period of 1, 2, 3 or 4 years. It is ideal if your business prefers to reduce its financial risk by not owning the vehicle and having to deal with the administration with new cars and also worrying about the value of the car over time.

As a business you may also be able to apportion some of the rentals towards tax relief if you are VAT registered. Contract Hire is also deemed to be an operating and is regarded differently to purchase contracts. As a result your business may benefit from other tax advantages.

Contract Hire payments are specific to the car you buy and are also dependent on the amount of mileage the car will do each year. A deposit will have to be paid and this normally amounts to 3 months of the contract hire payment.

Conclusion

There are so many car finance options now available it would be hard to see why you cannot get your hands on whatever car you wanted, within reason. If you don’t fancy taking on car finance then you can also look at secured or personal loans if you think it would work out cheaper or easier to make your dream car purchase.

Car lease finance is a great option for anyone who needs a car for employees or business use, or who lacks the finances to make an upfront payment on purchasing a car for their business.

Many however fail to see the point of car lease finance and point out that all that money is essentially ‘wasted’ as they have nothing to show for it at the end of the loan. Of course everyone hires cars when going on holiday and this makes a lot of sense as a way to get around the area you’re visiting and avoid understanding public transport systems in a foreign language. Leasing a car rather than owning one however is a different matter, and one that not everyone fully understands as after a significant amount of time they could likely have almost purchased the car themselves. However this is a rather short sighted view, as a car lease finance saves a lot of money in other ways too.

With a car lease finance you save yourself money on tax, on insurance (if it’s a good loan) and on depreciation. If you don’t have much capital to invest in a new car, then chances are you’d likely buy an old car with a lot of miles. That means that you can expect to pay for a car that has been well used in the past. Add to this tax and insurance (often you do pay insurance, but it’s provided by the car lease finance company and included as one payment for a cheaper price) and you’re looking at up to six months before your leased car has really made a dent in what you would pay for a new car – not counting the cost of the car itself even – and of course none of this money has anything to ‘show for it’ at the end either.

This becomes particularly important when you only need the car for a short period of time. If you just need the vehicle for a few months, then you’ll find that buying a car of your own, even second hand, is much more expensive and a lot more hassle and really isn’t worth it if you intend to sell or scrap the car at the end of the same time period.

A car lease finance has another bonus too – in that by saving money on not buying the car or paying for the insurance you’ll be able to choose a far nicer and newer vehicle than you otherwise would be able to. Drive around in a Mercedes and you’ll get a lot of looks, and no one will need to know it’s not yours. Of course if you want to cut the price even more you can hire an older car and pay less.

Looking for the best deal on your car lease finance then is important and there are a lot of things you need to consider before you sign a contract. First of all make sure that as stated above you won’t be paying any bills yourself. Good car lease finance companies will cover you on the insurance or provide it themselves for a cheaper price and should obviously cover tax and servicing. Of course you will likely also want to look into the exact vehicles they have on offer, and if you’re going to be using the car for an extended period of time you will want to have a test drive to ensure you like it – just as you would with a car you owned.

Of course you also need to look into rates and premiums, so check the competition and look at price comparison websites before you make a decision. Many of these allow you to enter your details and then bring up the best option for you to ensure that you get a deal that suits you and your budget.