Owning a car is a game changer in anyone’s life. It is seen as not just a necessity for most but also a status symbol. A person’s desirability is directly proportional to how swanky the car is and with a whole wide world of choices available, owning a car is now a lot easier. However the only hurdle in this entire activity is paying for the set of wheels. Most people keep some funding aside so as to purchase the car of their choice but others will have to procure financing from other sources. Some of the other options through which customers can obtain financing is through car loans or different types of financing.
Financing options available for cars
Customers can pay for their cars in many ways. They can either choose to pay in one lump sum amount or turn to loans, hire purchase, personal contract hire or personal contract purchase. Paying for the car in one lump sum amount is not an option that most individuals are comfortable choosing hence auto/car loans are one of the most popular choices.
Car loans involve borrowing the amount required to pay for the vehicle from a bank or other financial institutions and lenders. A rate of interest is imposed based on the amount of financing required and the repayment capacity of the borrower. Through this option, customers can avail instant ownership of the car. However, customers need to ensure that they do not choose a long repayment tenure as this might increase the interest amount that is to be paid. This finance option is feasible if customers plan to keep the car that they have purchased for a long duration.
Hire Purchase is a practice that was initially implemented in the United Kingdom to allow customers the option of purchasing expensive items. In this option, the buyer usually pays a small percentage of the car amount, about 20% of the car price as deposit after which he/she will have to make fixed monthly installments. Until the complete amount is paid the customer does not own the car nor will he/she be allowed to sell it.
Personal Contract Hire is an option that is similar to leasing a vehicle. Customers are allowed to rent the car of their choice for an amount of time along with limited mileage. However, customers are not allowed to purchase the car at the end of the rental period. This option is chosen by individuals who prefer to change cars frequently.
Personal Contract Purchase is similar to the option of hire purchase as customers will have to pay a deposit amount before and also pay installments monthly. However, customers have the option of keeping the vehicle, returning it or exchanging it for a replacement at the end of the installment period. Only if the car is in a bad condition will customers have to pay an additional amount depending on the damage caused. In case the customer decides to keep the car then he/she can do so for the previously agreed-upon price.
Although there are debates as to the best option to finance a car, it is solely dependent on the customer’s requirements and financial standing. Paying for a car via cash saves customers from having to pay interest but if financing for the car is needed urgently or if it is expensive, then purchasing a car through any of the car finance options available is more feasible.
In case, a customer opts to pay for the car by availing any of the car finance options mentioned above then he/she must ensure that the entire loan is repaid along with interest before the due date or they will have to pay penalties.
After the settlement - next steps to be taken
Once customers have purchased the car by fulfilling the loan agreement and paying the interest rate and such, they will have to follow the steps given below to ensure that they have complete ownership of the car and to prevent hassles in the future regarding documentation and so on. Customers will have to approach the bank that they have procured the car finance from or the dealer who has provided the finance option and ask for the following -
- Release of documents such as the Original LTO Certificate of Registration and Chattel Mortgage with the official receipt.
- Chattel Mortgage Cancellation
- The original LTO Certificate of Registration is to be unencumbered
- Maintain the documents
Customers may have to pay notary fee and ask for the release of a copy of Promissory Note, Chattel Mortgage, original LTO Certificate of Registration and the Official receipt. Customers are advised to find out the time taken for these documents to be furnished before itself. Chattel mortgage refers to mortgage imposed on a movable property such as cars.
Customers will have to visit the closest Register of Deeds in their area and provide the ‘Release of Chattel Mortgage with Promissory Note’ and pay the fee required. The cancelled mortgage will be issued. After receiving this, customers can unencumber their LTO CR after renewing the LTO registration of their car.
Customers will need to visit the LTO agency that had issued the LTO registration certificate and pay the required fee amount. Then customers will have to submit the the Chattel mortgage document that has been cancelled and the original receipt. Individuals will have to surrender their ‘Encumbered’ LTO Certificate of Registration. After this the LTO Agency will provide another LTO Certificate of Registration that does not have ‘Encumbered’ on it. Again the time taken to do this varies.
Customers need to ensure that they maintain all their documents safely and that they keep a copy of these in their car as well.
By following the steps mentioned above, customers can claim complete ownership of their car.