Why You Need A Car Loan
In today’s world, consumer motor vehicles have virtually replaced all other forms of transportation outside of government-supported public transportation. Even in scenarios where traveling by public transportation is feasible – if not faster than traveling by car, truck, SUV, or van, like in the world’s largest, most congested cities – many people would, in an ideal situation, prefer to own a vehicle.
Unfortunately, most people don’t have enough money to purchase a vehicle with cash, or even trade existing assets into dealerships in exchange for a car or truck. This holds true in Australia, especially, home of more consumer debt per household than almost every country in the world.
Hope is far from lost for people without tens of thousands of dollars to spend on a vehicle – that hope coming in the form of a car loan.
Let’s look into the basics the modern-day car loan, how they can be advantageous to purchasing or leasing, and how you can find a favorably-priced Stratton finance car loan https://www.strattonfinance.com.au/car-finance/options/car-loan.aspx
Car loan defined
A car loan is far from complex in nature, although how dealerships screen applicants for suitability is, in fact, difficult to understand at first glance. The car loan involves principal, interest, term periods, and financing fees.
In its simplest form, a car loan worth $X amount today will cost $X + interest + financing fees. Just like every other type of lender – home, furniture, cash money – charging interest and financing fees is an integral part of lending.
Dealerships charge interest for two main reasons:
Loaning anything to others is inherently risky. Lenders commonly face borrowers that don’t pay them back at all or in full, whether it’s on purpose or entirely unintentional. As such, if dealerships – any lenders, really – failed to charge interest on their loaned assets, they couldn’t possibly hedge against the uncertainties that come hand-in-hand with lending.
In virtually every developed country, the value of money decreases over time. Also called inflation or the time value of money, collecting interest allows lenders to keep up with current inflation rates. In most cases, interest rates exceed inflation.
How can I obtain a favorably-priced car loan without settling for a bunk car?
- Maintain employment over several months – if not years; the longer the better – and make certain to have access to legitimate proof of income.
- Don’t be afraid to shop around. Dealerships often try to frame their offers in as positive a light as possible, meaning you could fall trap to their sales-oriented goals.
- Seek out a credit report from one or more reputable agencies. Such reports will indicate any outstanding marks on your financial background, allowing you to remove them by satisfying debts or closing lines of credit, in turn yielding lower interest rates.