The term Car finance refers to the various financial products which allow someone or an individual to acquire a car, which includes car loans and leases.
The most common method of buying a car in the United States of America is lending the money and then paying it off in instalments. Over 85% of new cars and half of the used cars are financed (as opposed to being paid for in a lump sum with cash). Roughly 30% – 40% of new vehicles during the same time period were leased.
A direct and indirect method are the primary ways to buy a car. A direct loan is one that the borrower arranges with a lender directly. Indirect financing is arranged by the car dealership where the car is purchased. In legal terms, one can not refer to an indirect loan as a loan. Technically, when a car buyer obtains financing facilitated by a dealership, a Retail Installment Sales Contract is established between the buyer and dealer, rather than a loan agreement.
Roughly half of new cars in the United States of America is financed by the captive financing arms of car manufacturers, such as the Ford Motor Credit Company. A number of cars in the small range are financed directly by the dealership at “Buy Here Pay Here” dealers, which cater to customers with subprime credit. Buy Here Pay Here financing accounts for 8% of the total financing market.
In the United Kingdom car financing options similarly include car loans, hire purchase, personal contract hires (car leasing) and Personal Contract Purchases.
CAR Leasing Concept
Car leasing concept is quite simple to understand, yet many automotive consumers have difficulty understanding it and are often skeptical, even afraid of it. Furthermore, they misunderstand it as a kind of “rent-to-own” scheme, which clever dealers hatch up to separate good people from their money.
In fact, for decades, the business world has witnessed leasing being used as a common financial concept in financing equipment, buildings, and vehicles. Surprisingly, consumer automobile leasing has only been used generally for about 30 years.
A lot of individuals are of the notion that car leasing is the same as renting. However, this is not true. Simply put, car leasing is a form of auto financing, but a bit more complicated than just purchasing a vehicle on loan.
If you understand how car leasing by works, you will be better prepared to make intelligent decisions about leasing.
UNDERSTAND HOW CAR LEASING WORKS
Just like any business transaction, the key to successful and smart auto leasing is to have a knowledge of how the leasing process is being conducted, and be fully prepared before making decisions. With this, you can use leasing to your benefit. Another factor is to know when to lease and when not to so that you can predict a good market.
THE ESSENCE OF CAR LEASING
As recently as 21 years ago, many automobile consumers had never heard of leasing, much less done it. Now, approximately 35% (one of every three) of all new cars, trucks, SUVs, and vans are leased. Of those automobiles, luxury cars are leased at an even higher rate of 70%-75%.
After a temporary setback a few years ago, car leasing is again growing in consumer popularity. Take a glance at the volume of lease ads on your Television or in the local newspaper to get a notion of how popular automobile leasing has become, especially during times of economic recession when consumers are looking for more affordable ways to meet their transportation needs.
In a nutshell, Leasing provides an alternative method of financing that offers several benefits that are beneficial to many automotive consumers. However, leasing offers significantly lower monthly payments than a loan, although that is not a good enough reason, by itself, to decide to lease. If you would like to know more about car finance, please visit this link: car finance.
Image Source: BigStock.com (licensed)