When purchasing a used car, you may be required to put down a deposit, secure the car with a loan, or pay in full. A down payment gives you equity in the car and helps you avoid repossession if you have a loan. You may be required to purchase car insurance before driving the car. You may also be asked to pay a registration fee. You may be required to make payments on the loan for a certain period of time.
How a used car is financed depends on the agreement between you and the seller. The following are some of the terms you may be required to follow when purchasing a used car:
• You may be required to finance the car for a certain period of time, or until it’s paid off.
• You may be required to sign an agreement for a specific period of time, and then transfer the car to another person. This is known as an open-end loan.
• You may be able to buy a car and have it financed by two different companies. This is known as a lease-end loan.
• You may be able to buy a car and have it financed by one company. This is known as a buy-back loan.
• You may be able to finance the car and make payments on it over time. This is known as a loan consolidation loan.
• You may be required to pay interest on the amount you owe.
The different types of financing include:
• A loan: A loan is a sum of money that you borrow from someone. You may have to pay interest on the amount you owe. You can repay the loan in full or pay only a certain amount each month.
• A lease-end loan: This is an agreement where the car is leased, and the finance company owns it until you pay off the balance of the car’s purchase price. The interest charged on this type of financing is known as lease payments, or lease rate.
• A buy-back loan: This is an agreement where, instead of buying the car outright, you make monthly payments for a certain period of time before taking ownership of it. The interest charged on this type of financing is known as buyback rate, or buy-back rate. The term “buy back” refers to when you take ownership of a car at end of the term and are required to make monthly payments for another period before taking ownership again.