When buying assets such as homes or vehicles, etc., you might be at a disadvantage to pay the price upfront. Most people don’t choose to pay the entire cost while buying such things. Even if you can make the entire payment, you might still find it better to pay it in instalments. Many options are available for people nowadays. There are mortgage arrangements of different types available for buying houses.
Similarly, when it comes to vehicles, you have the option for a hire-purchase agreement. It is increasingly being availed by people and has made buying cars easier than ever. Are you looking to buy a car? Then, you must consider this option and see what it has to offer you. Here, you’ll find all that you need to know about this arrangement.
How does this arrangement work?
If you want to buy a vehicle, you would have to save a lot of money and might have to wait for quite a long time. However, this arrangement lets you start the purchase by depositing a fixed part of the cost of the goods. After that, you can keep and use the vehicle while paying the remaining of its value within a fixed period.
Generally, the time that is given can be up to 5 years. The amount you’ll pay as a monthly instalment would be fixed as well. In case you’re wondering, this option is available for buying used cars as well. You can set up this arrangement either through a broker or your car dealer. After you’ve paid all the instalments, you’ll have to pay a certain amount, as decided at the beginning of the agreement, to get ownership of the vehicle.
The rules and the monthly amounts will be specified in the contract. So, you need to go through it carefully and check whether everything is accurately stated before signing it. It works similarly to any other forms of credit.
Is this option open to you?
Are you looking to buy a vehicle on hire-purchase? Then, you have to fulfil only a couple of conditions to be able to apply for this arrangement. You need to be an adult, that is 18 years or above. Additionally, you must also have a driving license. In case, you don’t have to get one, you can avail this arrangement.
What amount do you have to pay monthly?
When you get this arrangement, you have to decide the monthly payment amount with the provider in a sitting. Now, you might wonder on what basis this will be done. In that case, your credit file plays a significant role in this matter. Wherever you go for any credit arrangement, the provider always asks for your credit report. You can either present it to them or simply tell them to access it through your reference agency.
After going through the file, they would decide what to charge you. The deposit amount is generally a maximum of 10% of the price of the vehicle. As for the instalments, the better your credit score is, the lesser you’ll be charged. That is because the provider would see it as a sign that there is a low risk for them in the arrangement.
It must also be pointed out that, if you have a low credit score, this arrangement is the best option for you. Even when you can’t get other types of credit, the hire-purchase method will be open to you.
How do you find the Best Offer?
While looking for a hire-purchase agreement, you’ll come across a lot of options. It might be a little hard for you to choose one among them. Needless to say, you’d want to find the best deal that you can. If you take the help of a broker, they’ll find one for you while you just relax. Now, if you prefer to do that by yourself, here are the steps that you need to follow:
Have enough Patience
In such an important matter, you must keep your patience and try not to do things hastily. Otherwise, it might affect your ability to make the best decisions. You need to go through every step carefully to find yourself the best deal. For that, you need to keep a sufficient amount of tie on hand. Otherwise, it would be better if you give the task to a broker.
Always compare the total cost
When you’re going through different options, you’ll be comparing them on different grounds. However, to accurately determine the best one, you have to take the overall cost into account. After all, getting the best deal means buying as cheaply as possible.
Compare the annual rather than monthly payments
When people compare the instalments that you have to pay, they often make the mistake of considering only the monthly one. You must always take into account the overall expenses in a year. This is necessary if you want to know the accurate cost. Thus, the small monthly amounts add up to be a large one after being added with some other charges. If you don’t follow this step, you might end up making the wrong decision.
Go through a lot of options
This is a necessary step if you want to get the best offer. You must not settle for the third or fourth offer that you find, no matter how good it is. There is always a chance that you might find a better one if you look in the right places. So, go through as many of them as you can and pick the one that suits you best.
What if you want to cancel the agreement?
It is often the case that people are unable to pay the instalments or simply don’t need the vehicle any more. Maybe you have decided to buy a different car than the one you’re currently using with the hire-purchase agreement. In all these cases, you might want to cancel the arrangement.
Unfortunately, there isn’t any other way out if you’re looking for one. You either have to stick to the rules that you had signed on to or cancel the deal. If you choose the second option, it is very simple. You just have to write to the provider that you cancel the deal and return the goods. In case, you’re wondering, you only have to pay half the cost of the deal before you can cancel it, then you can go your own way.
What are the viable alternatives to it?
Do you find this arrangement unsuitable or have cancelled it as it didn’t work out? In any case, there is no lack of other options open to you. From what it seems, the instalments in this arrangement are higher as compared to others. You can try getting a simple car loan from the bank.
Maybe you’ll find one that has more affordable payments. Apart from that, you can also try out different finance companies. There’s also the good old method of saving if you don’t mind waiting for the time it is going to take.