With the prices of cars rising rapidly, cash purchases have become problematic for many, with buyers opting to look for different financing methods.

While saving up and making a cash purchase is a great move, financing offers several benefits that can help buyers get a car without breaking their banks while building their credit.

According to Ruthless Focus, a car dealership and car import company based in Mombasa, owning a car has become easier today than it was ten years ago, given the increasing financing options. Some of the best methods a buyer can use to own a car are;

Hire purchase

This is whereby you pay a deposit and pay off the value of the car in monthly installments, with the loan secured against the car. This means you don’t own the vehicle until the last payment is made.

Usually, the higher purchase price comes with interest added on top. The price depends on the car type you are buying and the dealership company you are buying from.

The beauty of this method is that it gives you a car you cannot afford, and there is no paperwork needed, making it a simple process.

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”Another thing you need to know about hire purchase is that there is no collateral. Apart from the deposit that you are required to have, you must at least have money for the tracking device that is usually installed in your car so that the dealer can easily access the car.’’

For people who want to buy cars for businesses, this method can work well with them since they will have the opportunity to pay for the car fully with the amount of money the car has generated.

Bank Financing

This is whereby you go directly to a bank to request a car loan. Banks are willing to buy you a car as long as your banking system and statement is satisfactory.

They also give you enough time to repay your loan without pressure. You pay the loan off in monthly installments, plus interest, over a predetermined period of time.

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Most of these loans are secured, meaning your car is used as collateral. If you fail to make your loan payments, the lender has the right to repossess the car and sell it to get their money back.

Saccos

Saccos are a great option due to their low-interest rates. Their payment options are very flexible, and they offer longer loan repayment schedules.

However,  unlike other financial institutions, Saccos give loans to their customers depending on the amount of money they have saved within the Sacco.

Microfinance Institution

A microfinance institution can be a good car financing option for anyone without a regular income. One reason why many buyers go for microfinance institutions as their financing option is because the process is noticeably faster from application to disbursement as compared to commercial banks.

However, some of these institutions have punitive interest rates, hidden charges, and lots of additional unnecessary charges.