When you ask about the different ways to pay for a used car, the first answers are the cashier’s check and the bank transfer. Few buyers or sellers of used cars use cash to settle the transaction. There is also another alternative, leasing. All these payment solutions will be discussed in this guide.
People who have enough money to buy a car can perfectly pay for a new or used car for cash. The purchase in cash is a transaction that can be made with an individual or at a dealer. The operation will be carried out in two stages. A first sum paid as a purchase guarantee and the rest upon delivery of the car. Buying for cash is an excellent solution for those who can afford it. You no longer must worry about monthly payments to repay any credit. In addition, this transaction allows you to pay less interest than when you want to buy a car per month.
The other advantage of buying for cash is that it is easier to get credit if you need it. The great advantage of buying a car is that it can be sold quickly. You don’t have to wait for the loan to be repaid before you can use it as you wish. The car belongs to the buyer from the first day. By purchasing for cash from a dealer, it is impossible to obtain discounts on the price of the vehicle. Ultimately, the cash purchase allows you to benefit from a discount on an oil change or the addition of a small option for the car.
The disadvantage of paying for the entire purchase at once is that you cannot take advantage of leasing. The tailor-made financing offer is useful for the self-employed or those who want to change cars every 3 or 5 years. When you buy a car for cash, you will need to be sure you can prove that the amount comes from legal and taxable work. This method of purchase can also be made by proving that the money comes from a lottery win or inheritance.
Buying a car by credit
Buying cars on credit as a pleasure purchase allows you to spread your expenses over several years. While it is easy to obtain a car loan, this method of financing does not only have advantages. The credit represents a commitment over several years. By taking out a car loan, the buyer commits on average between 48 and 60 months. During this period, it guarantees the payment of a certain number of monthly bills. Medium-term commitment can turn into a nightmare in the event of financial difficulty.
To reduce the risk of non-payment of credit, it is better to take out insurance. This method of financing has additional costs such as application fees, interest… The longer the credit, the more interest is paid. Although the application fees are paid in a single instalment, the amount of interest is added during the entire repayment period of the loan. A buyer who takes out a car loan cannot know how his situation will develop for a few years. Several events may prevent him from meeting his monthly payments. Credit can also lead to the risk of over-indebtedness.
Also known as leasing, leasing with a promise to sell or leasing, leasing with an option to purchase (LOA) is a common method of payment when buying a car. This consumer credit allows you to have the vehicle at your disposal in return for monthly payments. The tenant of the car will be able to buy the car at the end of the contract if he/she wishes. If he does not wish to buy the car, he will have to return it.
This type of purchase is useful when you are not sure if you want to keep the property for several years. The consumer will just be a tenant for a period that generally varies from 24 to 72 months. To operate, the bank or credit institution purchases the vehicle on behalf of the consumer. The leasing subscriber may use it by agreeing to pay him a monthly rent. In the event of a payment incident, the owner can recover the property.