Owning a car is one of the most significant decisions you can make. Even for ‘budget’ models, the costs involved can dent your budget. Despite the costs involved, having access to a car improves the overall quality of life you enjoy. It is easier to commute to work, run errands, and meet social commitments when you don’t have to depend on public transportation.
There are two ways to have your own car; you can either buy it or lease it. Buying a car means purchasing it from its previous owner and taking ownership of the vehicle. This usually involves making a cash deposit and making monthly repayments. You can also apply for car finance.
Alternatively, you can lease a vehicle in which case you get to ‘rent’ it for a specified period of time. With a lease, you don’t own the car.
In what circumstances is leasing a better option than buying a car?
If you will be using the car for business purposes
In the UK, the US and the EU; the monthly leasing fee is tax-deductible if the vehicle is being used primarily for business purposes. In most of these jurisdictions, the same does not apply for the monthly instalment payments that you make when you are purchasing a car.
Assuming that the monthly leasing charge is similar to the monthly car payments when purchasing, you will save money when you choose to lease. Also, make sure to check ULEZ.
If you change cars often
Some people form long-term bonds with their cars that can span decades while some of us prefer to drive the latest model. If you are easily distracted by newer models, then leasing is the right option for you.
Buying and selling cars within short periods of time is not financially sustainable; simply lease a car for a while and get a new car when your lease expires.
If you require the vehicle on a temporary basis
Purchasing a vehicle is a long-term commitment. You need to ensure that the vehicle will meet your needs for years to come. If your needs are more temporary, then it makes more sense to lease a vehicle rather than purchasing it.
Most lease agreements cover periods ranging from one month to two years. If you require a vehicle for less than two years, it is much cheaper to lease it rather than buying it.
You should always lease with an established, well-reviewed company that offers coverage throughout the UK if you want to have a pleasant experience.
If you are working with a tight budget
When leasing a car, you are not taking ownership of the vehicle, just paying for the depreciation it experiences while under your usage.
This means that the monthly cost of leasing a car will be much lower than the cost of monthly instalment payments when purchasing. In some instances, the monthly purchase payment might even double the leasing charge.
If a car leasing service is offering attractive sales promotions
The car leasing industry has become very competitive, and different leasing agencies usually have offers in place to entice clients.
The most popular of these is the leasing give-away deal where older models are available for lease at highly discounted prices. Take advantage of these offers as they appear.
How to Find the Best Car Finance Interest Rates
When buying a new car, many people take out the finance deal offered at their dealer. They don’t usually research low rate car finance that could be available elsewhere.
Unless you have bad credit and you need car finance with bad credit you can shop around for the best rates.
Don’t let the salesman push you into a corner and make you sign a credit agreement you haven’t looked over. Instead, do your research and see what low finance car deals are available.
How to choose the right car finance option:
Hire Purchase vs Personal Contract Purchase
Both of these finance options are similar. They both require a deposit, plus regular monthly payments. The vital difference, however, is that at the end of hire purchase, you own the car.
Although this is possible with PCP too, you pay the depreciated cost rather than the car’s original value.
You then have the option of owning the car by making a final payment or handing it back to the dealership.
Personal Loan vs Credit Card
It’s also possible to pay for your new car using either a bank loan or credit card. Loans are particularly useful if you intend on selling your vehicle in the future. If you’re looking for a more affordable car, a credit card is an excellent choice for payment.
However, only do this if you’re 100% comfortable in making the regular monthly payments. Missed payments can sting you with unwanted interest.
Ways to Get the Best Interest Rate Possible
We believe that getting the best car finance rate possible for your car finance deal is a careful combination of thorough research and making the right choices.
Here are the main things you need to think about when finding the best car loan deals or low-interest car loans:
Type of loan
Interest rates and monthly payments can vary significantly between PCP and HP. So, make sure to think carefully about whether you intend to keep your car at the end of your finance deal. If you’re unsure, your dealership can advise you further.
Amount of deposit
Our advice here is simple: Put down as much deposit as you can. A larger deposit means your monthly payments will be much lower. Subsequently, this will help you secure the best car finance rates possible.
Interest and APR
Be sure to use a car loan comparison site to find low-interest car finance. You will notice dramatic differences in car finance APR and car loan interest rate. However, there are other fees to take into consideration too.
These include late and early repayment fees, arrangement fees, option to purchase fees and balloon payments. Be sure to take these costs seriously. Many don’t consider them until their contract ends, and are left with unwanted bills.
Personal credit history. Simply applying to all car finance providers is a big mistake. Instead, only apply if you think it’s likely that they’ll accept you.
Rejected applications can be damaging to your personal credit score. In contrast, if your credit score is healthy, your monthly payments could be lower. Which means the interest you’ll have to fork out will also be reduced.
Finding Investment For Your Business: Due Diligence Works Both Ways
There’s nothing quite the same as experiencing that eureka moment when you decided your idea was more than just a pipedream and it’s time you did something about it.
Telling your friends and family, brainstorming until you run out of Post-it notes, designing a great business model… these are the first steps towards becoming your own boss, and it feels great.
That’s when the stress kicks in.
The majority of entrepreneurs I meet rely on bootstrap finance to kick themselves off, but there comes a time when you really need to think about how you plan on ensuring your business has some steady cash flow to implement the necessary next steps.
I’ve written a lot about alternative finance and the different routes available for startups today.
For an investor, willingness to give away a lump sum of cash to a startup who has limited past experience and a very fragmented idea of their financials and future profits is intimidating due to the amount of risk attached to that deal.
Consequently, investors are very cautious and will ask questions and perform as many checks necessary to inspire enough confidence in your business model to justify their signature on the dotted line.
It’s hard for startups not to bite the hand off any investor offering much needed capital to facilitate growth. However, this is where a lot of entrepreneurs go wrong.
This being common knowledge, it’s hard for startups not to bite the hand off any investor offering much-needed capital to facilitate growth.
However, this is where a lot of entrepreneurs go wrong.
Due diligence doesn’t just work one way; you need to have enough assurance in your idea, your team and your pitch to make an investment deal work for you.
When you’re pitching, think about your hook – tell a story and get them excited, don’t just bog them down with figures that may or not come to fruition. Illustrate your passion and remember that, as a startup, all good investors will expect you to fail at first, so never overpromise and under deliver.
It’s important to demonstrate how your investor can realise their investment by outlining a prospective exit strategy.
Whilst it’s very important to talk about numbers, scale, growth and margin, don’t leave out how you plan to execute your strategy.
Ideas in themselves don’t make money. It’s excellent execution that delivers results.
Appointing an investor to your board is like a marriage, you need to work with them day to day.
As an entrepreneur, you need to know what kind of investor you’re looking for. It’s not just about finding a person with deep pockets to keep financing your company; it’s about finding someone who believes in your product almost as much as you do.
Appointing an investor to your board is like a marriage, you need to work with them day to day. Whoever you chose is likely to be on the board for years, therefore, you need to consistently work on the relationship, which will take time to nurture.
It should also be a pre-requisite that your potential investor has experience scaling and selling a business in the same industry as you.
Remember that the best thing about angels, other than their money, are the contacts they’ve managed to curate over years of experience. The doors that could be opened by appointing an angel investor absolutely have the potential to transform your business.
By sitting on your board, the investor will play an essential role in discussing and setting the strategic direction of your business. By pulling you away from the day-to-day to focus on the strategic issue of what maximises value creation they will hone your strategic thinking and steer the direction of the business.
This is exactly why working with the wrong investor could be a major deterrent for your business.
If you’re in the phase of pitching for investment, be sure to ask every relevant question you can think of can and learn as much as you can about them and their experience, before you make a decision.
If they’re a right fit, this could be the first step towards success, not only in this round of finance but future rounds (depending on your relationship management).
On the contrary, if they’re not right, don’t be afraid to walk away, otherwise, you’ll end up with a pile of legal fees trying to get out of a sticky situation.