To drive a car, you must have a driver's license and, of course, a car. For many of us, a car is a dream vehicle. But car purchasing is a difficult thing. If you want, you can try the car finance option.
So, what does it mean to finance a car? Car finance is a way to buy a car, whether it is a new or used one. Assume you've decided to buy a car for $10,000. If you have only 2,000 USD in your pocket, you can get the car with the facility of car financing. It's similar to a car loan.
But there are some important rules for car finance. Its interest rate, total figure, repayment year, etc. Read our next paragraphs for car finance details.
 |
| Car finance is not too difficult to deal with. Image: Enric Cruz López, Pexels |
What Does it Mean to Finance a Car?
To purchase a car, you need to have a handsome sum of cash, right? Don't worry if you don't have the entire amount; there is a way to get money for your car-buying adventure. If you have only one fifth of the total budget, you can take it today. Car finance means is the process of arranging funds for a car purchase plan that will charge interest and fees. You may need to pay car insurance fees as well. It is a popular plan for purchasing a new or used car.
Generally, car finance companies prefer to finance new cars. However, how much money can you get from a car finance company? It has a common rule that differs rarely; see it in the next paragraph.
|
Rule |
Details |
|
Car finance figure |
80% of the total price That means the down payment will be at least 20% of the total price. Car financing companies in some countries require a 30% down payment. |
|
Repayment amount |
It must not exceed 8% of your monthly income. You can use this car repayment calculator for a clear idea. |
|
Repayment year/ length |
For a general car, you will have 36 months to pay. But if the deal is related to a luxury car, you must pay it over 12 months. |
Interest rate of a car finance deal
In general, interest rates begin at 0.9%. And its peak number is 3. A car finance interest rate of more than 3% is not a good deal.In some developing countries, it may be higher.
Car finance specialists say you should bargain for a reduced interest rate.
Is it necessary to buy a car insurance policy?
Yes, you must buy a car insurance policy to get a car financing facility. Car insurance is required in some states when purchasing a car outright or with car financing.
Final thoughts
On the whole, you have gotten an idea of what it means to finance a car. In short, car financing is a good way to get a car without paying in full. Remember, when you're in a car dealership, you should actively compare interest rates and car prices.