Inflation beware
When buying a car, consumers are faced with a number of options when it comes to financing. They can buy the vehicle outright, put down a deposit and make monthly payments, this option with a balloon payment at the end, or go the route of leasing.
Related: Can I finance a car with low income?
All the options have pros and cons, and it really comes down to the consumer's individual circumstances. As dealers continue to vie for sales many will offer a no deposit sale, before entering into an agreement of this type consumers need to carefully consider what they are entering into.
Reverse deposit
This type of agreement will typically consist of the consumer purchasing the vehicle without putting down a deposit, what this means is that the deal will be structured in such a way that the consumer will have a slightly higher monthly installment and a considerably larger balloon payment as opposed to a standard installment plan. At the end of the agreement term, the consumer will be responsible for the large balloon payment which is in essence a reverse deposit situation.
The balloon payment will have to be completed before the consumer can officially take ownership of the car and many consumers cannot pull this together and are faced with refinancing the balloon payment or trading the car back in.
With the current economic climate, it is becoming increasingly difficult to scrape together a deposit to buy a vehicle but consumers should know that putting down a decent deposit will ultimately be the best option for them in the long run.
We highly advise scrutinizing your personal finances and circumstances as well as the agreement to ensure that you don't end up with a nasty surprise down the road.
