Article by Alex Shawn
Financing
Four Tips For Financing Your New Car
Whilst buying a car is without doubt an exciting time, it can also be stressful and costly. Most people (at least 80%) cannot afford to buy a new car outright. Therefore, most car buyers acquire a new car using a deposit as down payment and obtain car finance to fund the rest. The following five tips are valuable for people considering obtaining a new car as they give different options on how to best to fund the transaction.
1. Sell your current car privately instead of a part exchange – Whilst it is much more convenient to ‘trade in’ an existing vehicle as a part exchange on a new vehicle this will not maximise the money you get for your car. Done primarily for ease and convenience (if you put your car in as part exchange against a newer model you remove the whole selling process, advertising costs, people calling around your home to view the car and being annoyed by phone calls for weeks after the car has been sold), it is a known fact that a part exchange is the least profitable way to sell your car. Therefore, if you have the time and patience, it is advised that you opt for a private sale. Perhaps the best way to determine whether you should part exchange or sell is to determine the market value for your vehicle and compare this with some part exchange values. Whatever the difference between the two can be considered your payment for the hassle of private sale and therefore you can make an informed decision.
2. Car Finance From A Dealership – This is the most popular way to finance a car. Dealers provide approximately 65% of all car finance. The reason for this is that people shop for cars based on the price of the car and because 80% of all new car buyers need finance they end up taking finance from the same dealer that provides the best price on the car.
Dealers typically offer hire purchase or car leasing. Hire purchase is an arrangement where people sign a contract to make monthly payments across 3 – 5 years and they end up owning the car at the end of that payment period. Leasing is slightly different because it is often much, much cheaper you can have the option to buy the car at the end of the period or simply return it to the dealer. However, you must be careful with dealer finance (or any car finance for that matter) and you should always shop around and compare the monthly deal that you have been offered. Just because you negotiated a good price on the car doesn’t always mean that you are getting a good monthly price on the finance. In some cases the monthly payment could have a premium hidden in it with a high APR and therefore the calculation of your monthly payment may not relate to the ‘good price’ that you think you negotiated on your car. Therefore, shop around and compare the monthly payment, the total payment ensuring that you are comparing the same contract period etc with different dealers and finance providers irrespective of the price that you have negotiated on the car.
3. Car loans from a bank – Personal car loans account for only 13% of all new car finance. This is surprising because other than using cash, this is the only form of finance that enables the borrower to own the car from the point of purchase. Therefore, whilst most people think they own the car that they are driving, if they bought the car with finance and are still making monthly payments, then approximately 87% of all new cars are not actually owned by the drivers.
If you are thinking of purchasing a car using a car loan of some form you should always shop around based on APR. There are various comparison websites that enable you to compare car loans but you should always be careful about two things:
(i) the Apr that the website quotes to you is unlikely to be the one that you get. This is most likely the best APR you could get and it is often adjusted to meet how much of a ‘risk’ that bank may think you are;
(ii) do not submit too many applications for finance. If you submit three or four applications to different banks and you are refused by all of them, you might damage your credit record and make it difficult for you to obtain finance in the future. Some finance websites enable you to apply for a loan and they can advise you whether or not you are likely to succeed and this can be a safer way to apply
4. Lease your new car – As discussed above, car leasing is most often the cheapest way to finance your new car. In fact, according to the Finance & Leasing Association, in the first 6 months of this year it was the most popular form or finance provided by dealers. When making a decision on car finance, be sure that you actually need to own your next car? If so, then the only form of finance that permits this immediately is a personal loan from a bank – remember, with hire purchase you will not own the car. If ownership is not so important, then leasing is a cheap form of finance – but you must have a good credit rating. There are many benefits with car leasing as it allows you to receive a new car every few years (although this can change, depending on the lease agreement) without the hassle of a part exchange. However, make sure that you are familiar with the disadvantages (you need to agree an annual mileage limit) and as always be sure to shop around and compare like with like on all alternative car leasing deals.
Cheap Loans – Source of financing at low rate for each borrower
Article by Melissa Mia
You probably prefer to have a loan that is less heavy on your pocket and it’s easier to pay in order to have enough money to meet the expense of others. So loans mean exactly the purpose of providing low-interest loan for every type of borrower, thanks to strong competition in the loan market. Your all-purpose, such as restructuring, purchase car, wedding, debt consolidation, holidays, etc. can be easily reached by low cost loans.
Cheap loans are usually the ones allowed that some of security by the borrower. All home and can serve as collateral. As the lender feels the loan is well secured and is now safe for the prompt, safe return of the loan, has no problems in the form of guaranteed loans that have interest rates lower. If equity in the home is higher and the loan is also reduced interest rate is reduced, making their loans at low cost. Another way of loans at low cost is the story of your credit card excellent or good. The borrower is considered a risk for the creditor, because he has a record of lending over time. Thus, the debtor’s credit history is a good guarantee of loans at low cost. Make sure you know your credit score and good-looking, easy to pay off debts before applying for loans at subsidized rate.
Also make sure you have a big bank balance to show how much the lender. This ensures that you have a great ability to repay. Display documents of income and jobs, as well as bank statements for the creditor. One sure way for low-cost loans is to get online by credit institutions which do not include the costs of managing the loans and then using the loan cost is zero. Make sure you have a very broad comparison of different lenders in order to exercise the loans less.
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Factoring vs. A/R Financing: What’s the Difference?
In today’s tight credit environment, more and more businesses are having to turn to alternative financing and non-bank financing options to access the capital they need to keep the gears of their business running smoothly.
There are a number of different tools available to owners of cash-strapped businesses in search of financing, but two of the main ones are factoring and accounts receivable (A/R) financing. Sometimes, business owners lump these two options together in their minds, but in reality, there are a few slight differences that result in these being different financing products.
Factoring is the outright purchase of a business’ outstanding accounts receivable by a commercial finance company, or “factor.” Typically, the factor will advance the business between 70 and 90 percent of the value of the receivable at the time of purchase; the balance, less the factoring fee, is released when the invoice is collected. The factoring fee—which is based on the total face value of the invoice, not the percentage advanced—typically ranges from 1.5-5.5 percent, depending on such factors as the collection risk and how many days the funds are in use.
Under a factoring contract, the business can usually pick and choose which invoices to sell to the factor—it’s not usually an all-or-nothing scenario. Once it purchases an invoice, the factor manages the receivable until it is paid. The factor will essentially become the business’ defacto credit manager and A/R department, performing credit checks, analyzing credit reports, and mailing and documenting invoices and payments.
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A/R financing, meanwhile, is more like a traditional bank loan, but with some key differences. While bank loans may be secured by different kinds of collateral including plant and equipment, real estate and/or the personal assets of the business owner, A/R financing is backed strictly by a pledge of the business’ assets associated with the accounts receivable to the finance company.
Under an A/R financing arrangement, a borrowing base of 70 to 90 percent of the qualified receivables is established at each draw against which the business can borrow money. A collateral management fee (typically 1-2 percent) is charged against the outstanding amount and when money is advanced, interest is assessed only on the amount of money actually borrowed. Typically, in order to count toward the borrowing base, an invoice must be less than 90 days old and the underlying business must be deemed creditworthy by the finance company. Other conditions may also apply.
As you can see, comparing factoring and A/R financing is kind of tricky. One is actually a loan, while the other is the sale of an asset (invoices or receivables) to a third party. However, they act very similarly. Here are the main features of each to consider before you decide which one is the best fit for your company:
Factoring:
Offers more flexibility than A/R financing because businesses can pick and choose which invoices to sell to the factor.
Is fairly easy to qualify for. Ideal for newer and financially challenged companies.
Simple fee structure helps the company track total costs on an invoice-by-invoice basis.
A/R financing:
Is usually less expensive than factoring.
Tends to be easier to transition from A/R financing to a traditional bank line of credit when the company becomes bankable again.
Offers less flexibility than factoring because the business must submit all of its accounts receivable to the finance company as collateral.
Businesses will typically need a minimum of ,000 a month in sales to qualify for A/R financing, so it may not be available for very small companies.
Both factoring and A/R financing are usually considered to be transitional sources of financing that can carry a business through a time when it does not qualify for traditional bank financing.
After a period typically ranging from 12-24 months, companies are often able to repair their financial statements and become bankable once again. In some industries, however, companies continue to factor their invoices indefinitely—trucking is an example of an industry that relies heavily on factoring to keep its cash flowing.
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Alternative Financing and Non-Bank Financing: Don’t Be Afraid!
The good news is that, despite the tight credit environment, there are many alternative financing and non-bank financing options available to companies that need a cash infusion, whether it’s to beef up working capital or help facilitate growth.
However, the bad news is that business owners often shy away from non-bank financing because they don’t understand it. Most owners simply rely on their banker for financial information and many bankers (not surprisingly) have only limited experience with options beyond those offered by the bank.
To help ease some of the fear that owners often have of alternative financing, here is a description of the most common types of non-bank financing. There are many struggling businesses out there today that could benefit from one of these alternative financing options:
If a business has financial challenges, full-service factoring is a good solution. The business sells its outstanding accounts receivable on an ongoing basis to a commercial finance company (also referred to as a factoring company) at a discount—typically between 2-4 percent—and then the factoring company manages the receivable until it is paid. It is a great alternative when a traditional line of credit is simply not available. There are a number of variables to a program, including full recourse, non-recourse, notification and non-notification.
Here, a business can sell just one of its invoices to a factoring company without any commitment to minimum volumes or terms. It sounds like a good solution but it should be used sparingly. Spot factoring is typically more expensive than full-service factoring (in the 5-8 percent discount range) and usually requires extensive controls. In most cases, it does not solve the underlying lack of working capital issue.
A/R financing is an ideal solution for companies that are not yet bankable but have good financial statements and need more money than a traditional lender will provide. The business must submit all of its invoices through to the A/R finance company and pay a collateral management fee of about 1-2 percent to have them professionally managed. A borrowing base is calculated daily and when funds are requested an interest rate of Prime plus 1 to 5 points is applied. If and when the company becomes bankable, it is a fairly easytransition to a traditional bank line of credit.
This is a facility secured by all the assets of a company, including A/R, equipment, real estate and inventory. It’s a good alternative for companies with the right mix of assets and a need for at least million. The business continues to manage and collect its own receivables but submits an aging report each month to the ABL company, which will review and periodically audit the reports. Fees and interest make this product more expensive than traditional bank financing, but in many cases it provides access to more capital. In the right situation, this can be a very fair trade-off.
Ideal for a business that has a purchase order(s) but lacks the supplier credit needed to fill it. The business must be able to demonstrate a history of completing orders, and the account debtor placing the order must be financially strong. In most cases, a PO finance company requires the involvement of a factor or asset-based lender in the transaction. PO financing is a high-risk kind of financing, so the costs are usually very high and the due diligence required is quite intense.
The message I am trying to convey is simply that financially challenged business owners should not be afraid to consider alternative or non-bank financing options. It’s a fairly simple matter to learn what they are, how much they cost and how they work. Alternative financing is a much better option than facing the challenges of growth or turnaround alone. It is a known fact that the vast majority of business failures are due to a lack of working capital—but it doesn’t have to be that way.
With a better understanding of these different types of non-bank financing, you’ll be in a better position to decide if they might be the answer to your financing challenges.
This time Max Keiser and co-host, Stacy Herbert, look at the scandals of Tony “No Blood for Oil” Blair lying about selling the UK gold supply on “technical advice of the Bank of England;” a millionaire tramp in Sweden and a casino that refuses to pay in America; and, finally, the Irish ‘Bad Bank’ and the ‘Celtic Chernobyl.’ Max also talks to William ‘BJ’ Lawson, who is running for Congress in North Carolina’s 4th District, about Ron Paul Republicans, the Federal Reserve setting fiscal policy and defining President Obama.
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