Auto credit leasing or personal contract purchase is the new entity in the lending community and transactions which allows borrowers to take a car for few years at very low monthly installments. The main talking point about this auto credit option is that the applicant can get finances for any car, get a new car after few years and still pay low monthly installments for it. If one hears it like this then it might seem a little hard to believe but the following mentioned example carries the calculations involved in leasing which can be read to see for sure.
For example, take the price of the car in the current scenario to be 1000 dollars. This is just taken as example to clarify the calculations. Let the loan term be a couple of years and the interest charged be 10 percent. When auto credit is taken, the yearly installment comes to 600 dollars every year because of the interest amount addition in the loan. However, in auto credit leasing, the lender or leaser calculates the price of the car after two years. It is calculated by checking the reduction rate of the car or depreciation factor. Let’s say that the car’s price drops to 700 dollars after two years. The depreciation factor is taken high but it is the case with many cars out there.
Now, the difference of the prices is 300 dollars and this is what is taken on auto credit. This means that by adding the interest the total money that the applicant has to pay back over the course of the loan is 360 dollars. One can easily see that the price of the total installment in auto credit leasing is less than what it is for simple auto credit for the first year. However, this thing should be noted that the applicant doesn’t retain the car and gives money just for driving it for few years.
When applying for auto finance there are a number of institutions that one can choose from and some prominent among them include banks, dealerships, private lenders and credit unions. Out of these credit unions are the least popular because of their membership criteria. These institutions charge some fee to gain their membership but the services provided are certainly worth the fee. Credit unions, basically, are a sort of public financial forum. This means that by gaining the membership the person is gaining access to all the financial help he/she requires.
One might have heard that banks and credit unions are the only places which can provide the best rate. As banks deal with a lot of saving accounts it is easier for them to get the finances that are required for lending but credit unions work differently. By providing the membership fee the applicant becomes a partner of the union and can access to all the loan and auto finance features. This means that if he/she were a person from the outside looking to get just the finances then it wouldn’t be possible because there is no such provision for anybody.
It is seen that a lot of the time the auto finance applicants spend their money on dealerships and brokers which are actually middlemen for credit unions and banks. By gaining the membership of credit union the applicant can access the auto finance as well as other lending options such as RV loan, boat loan, home loan, personal loan and even credit cards. The members are given the facility of checking and saving account at the start which means that the person is enjoying all the comforts that a bank could give. Hence, it is safe to say that credit unions are one of the best places where one can get lowest rates on auto finance features.