With an increasing number of automobile buyers, the business of car loan has seen enormous growth in recent years. It is the disposable income determining the change in lifestyle habits and spending patterns.

There are a number of methods to secure car loan provided by lenders. People are now quick to see the reality of owning their dream car or SUV.

After the history and the basics of a car loan, this article takes you further into the subject, covering other important aspects.

Types of car loans
Those seeking the best deal on a car loan have multiple options to choose from. Here are the different types of car loans available to consumers.

A standard loan from banks, credit unions and others
It’s the simplest and the most common type of car loan. The financier offers money to the customer who should be financially sound. This loan involves additional expenses, and the loan can be secured or unsecured. Since the vehicle is the collateral, insurance is a must in this case.

Commercial hire purchase
The financier purchases the vehicle to hire it to a buyer for a specific period. The buyer can be an individual or a business making monthly payments. On completion of the payments within the said period, the ownership of the vehicle is transferred to the buyer.

Finance lease
Here, the financier buys the car and leases it to the buyer for immediate use, sans capital outlay. This arrangement is purely for business purposes and involves the payment of monthly rentals. The individual or the business is solely responsible for the maintenance and other risks involved. After the lease period is over, the buyer has the option to return, refinance or buy the vehicle for the remaining amount.

Novated lease
It’s a three-way agreement between you, the employee, your employer with an exchange for equal value. When you lease the car, your taxable salary reduces and helps you save on tax payments. A novated deed is signed where the employer pays the financier in line with your salary. The entire responsibility of the car rests on the motorist.

It’s one of the easiest and the most cost-effective ways to own a car. Earning a high salary is also not required. You can also bundle finance and running costs into a single and easy payment.

Operating lease
A financier buys the car and rents it to the motorist while maintaining the ownership of the car. The motorist is free from any risks that can arise. He also has the option to buy the vehicle or continue the rent after the term.

Chattel mortgage
This is a type of car loan where the financier offers money to buy the vehicle. A mortgage over the car serves as the security for the loan. There is an option to make an up-front deposit or use the trade-in option. The motorist can make the remaining payment at the end of the term.

Understanding the different types of car loans makes it easier for consumers to own their dream car.