Approved Car Loans Brisbane

A Comprehensive Overview of the Different Types of Car Loans

Very few people can afford to pay a lump sum figure for a new or used car when they want to upgrade their current means of transport. A vehicle, just like real estate property, is considered by many to be a hefty investment which has to be funded in installments, and this is where vehicle finance plans come into play. In the light of the popularity of car loans, there has been a proliferation of such financial products, particularly in among the middle class. Here's a quick overview of the most common types of auto loan offerings:

Commercial Hire Purchase and Chattel Mortgage

This type of hire purchase is almost similar to the traditional model that involves fast-moving commercial goods. Here, the financier/bank responsible will buy the car ( usually in cash ) and then hire it to the prospective consumer over a set duration, typically a maximum of 48 months. Such an arrangement can come in handy for both private owners, expats, and individuals. The hire purchase plan is tailored in such a way that the culmination of these monthly payments will eventually pay out the borrowed loan at the end of the set period. After this, the bank/financer will transfer the ownership of the car to the motorist. This model differs from a chattel mortgage in that, in the latter, the consumer will take ownership of the car immediately after purchase, not after completing the payments. In such a case, should they default on repaying the loan, the bank reserves the right to repossess the vehicle.

Financial Leasing

In such a situation, the financier or banker will buy the car and then lease it to the consumer, instead of hiring it as it is for hire purchase. This enables the end-user to start using the vehicle with very little or no initial deposit. Given the less prohibitive financial outlay of such a model, car leases are mostly reserved for business owners who are bootstrapping to set up a transport enterprise. Another closely related type of car loan under this category is the Novated Lease. Here, an employee is awarded a motor vehicle as part of their comprehensive salary package. In both cases, the owner is responsible for the financial maintenance of the leased vehicle and shoulders the trade-in residual risk of the vehicle should they want to dispose of it. At the end of the lease period, the consumer is usually offered the option to return, refinance, buy or sell the car.