Most will agree that cash is king. Most will also admit however that they don't have the means to do this. This leaves one option, a car loan. There are a number of different options and ways to approach financing your dream car. The one that's best for you will depend on your particular needs.
How the process works:
The application process will be fairly standard across the board, with some variations depending on which lending institution you go through.
1. Firstly you will need to fill out an application form. This will involve providing information including your personal details, employment details, monthly expenses and monthly income. The institution lending you the money will then use this information to determine whether you are eligible for vehicle finance.
2. The financier will ask you to provide copies of certain documents during this process to reinforce the
validity of your application. These documents will usually include: A Valid driver's license (a no brainer) recent bank statements or pay slips, proof of residence (for example: A utility bill with your listed home address on it).
3. Once you've completed the application process and provided all the necessary documentation, you'll need to wait a few days while your application is reviewed. If all goes well a consultant will contact you to confirm your application.
What are my options?
When it comes to car finance, you inevitably always end up going through the bank. You can approach a bank directly for finance, or you can get the dealership you're buying you're vehicle from to set up the finance. Larger banks will have a special division that deals with vehicle finance. When you buy the car from the dealership they will ask you whether you have finance set up already or if you want them to organize it for you.
The interest that you will be paying back will depend on the repo rate, your credit record and the loan period. The repo rate is the rate that banks lend money from the government reserve bank. The bank will add a percentage on to the repo rate to make a profit and cover costs. This is called the "prime" rate. Usually if you have a good credit record and fixed assets such as a house, you will be able to get prime or minus prime. Interest rates and loan periods will differ between banks.
A family member: The advantage here is flexibility. If there's someone in your family that has the means to lend you money to finance your car, it may be a good option to consider. You will most likely be able to negotiate the terms of the loan to a much greater degree than you would through a bank or dealership.
And there you have it. (Well more or less) If you have a better understanding of car finance then I guess my job is done.
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