Ever since Henry Ford started letting people buy his cars on the payment plan, car companies have gone out of their way to make it easy for people to get a new set of wheels. Indeed, a young person's first major purchase is often an automobile--and this purchase often serves as a means of opening the door to other credit. Today, it's even easier than ever, regardless of your credit status, to purchase a car.
Private financing in the form of "buy here, pay here" car lots often form the method of last resort for someone unable to obtain financing elsewhere, although the buyer should beware in situations like this--interest rates are often very high, and in some cases the price of the car itself may be inflated.
Most automobile manufacturers now have their own finance arm, through which consumers can often obtain incentives such as low interest rates or low down payments. Alternately, finance companies may be a source of auto loans check out how they compare. If you have an asset in the form of home equity, this can possibly be leveraged to obtain an auto loan, often at an attractive rate of interest. Purchasing a car with a home equity loan may also give you tax advantages.
Leases have become more common, and there are several different varieties of leases available for different circumstances. Leases usually provide the buyer with a low down payment and low monthly payments, but at the end of the lease term, the buyer must come up with a large lump sum in order to keep the car. There are ways around this balloon payment too and you may be able to refinance the amount due at the lease end. Novated leases offer the convenience of arranging payments through your employer with pre-tax dollars. Many companies are offering hybrid lease/purchase programs that are actually purchases that look like leases. These programs offer you the low down payment and low monthly payment of the lease, but your name actually goes on the title. Like the lease, the hybrid offering carries a large lump sum at the end of the term.
Closed-end leases are sometimes called "walk-away" leases, since it allows you to walk away from the car at the end of the lease term. The term is a bit misleading though, and you can't always just "walk away." At the end of the lease term, the vehicle must meet the lessor's standard. There are mileage restrictions involved, and if you bring the car back with higher mileage than agreed, you will have to pay a fee for each mile over the contracted amount. Normal "wear and tear" is expected, but the return condition of the vehicle will also determine whether or not you will have to pay anything at the end of the lease. An open-end lease differs somewhat, and usually has lower monthly payments involved. In an open-end lease, the automobile is appraised at the end of the lease term. If the appraised value is lower than the balance due, then you have to make up the difference.