At times, the idea of buying a car feels more like a paradox i.e. You require money to purchase a vehicle - however you need a vehicle to get to work so you can earn an income to purchase a vehicle. This is why availing car finance - obtaining a bank loan for car - is convenient. Having said that, it is important to investigate how car finance works, what your credit can mean for your loan terms and what to think about while trying to decide whether buying a car on lease in Pakistan is a good option or not.

How Does Car Finance Work?

In order to understand how to lease a car in Pakistan, below is an outline of the multitude of steps car finance companies follow:

1. Satisfy eligibility for auto finance

The procedure for auto finance contrasts from one bank to another yet the gist stays the same. A car finance company expects you to satisfy a set of eligibility requirements which express that you must be a Pakistani resident of around 22-65 years of age with a specified amount of income, be it from a job, your own business or investments. Your income essentially assists the auto finance companies in calculating the monthly car installment you will be required to pay in order to pay off the car loan. However, there are numerous different subtleties to this, which vary from one bank to another.

2. Providing documentation for vehicle finance

You are required to present all your significant records to the vehicle finance company for assessment that include passport size photos, copies of CNIC, previous bank statements revealing your financial credibility and a letter from your office characterizing your position and salary. This is a rundown of essential records that are expected by any vehicle finance company. However, you might be required to produce other relevant documents as well depending upon your car loan case.

3. Handling of car finance by the bank

After satisfying the eligibility and documentation requirements, the banks take on the responsibility of assessing your application. Car Finance Companies want to weigh out the several risk factors involved in lending a car loan in Pakistan for their revenue is contingent upon the stability of your work and pay. Upon successful validation of your case, the bank drafts your car finance quote determining your monthly car installment in light of the car loan interest rate. Once the arrangement is settled, the bank books the vehicle for you and works towards its delivery.

Advantages of Leasing a Car in Pakistan

Now that we are clear about the working of a car financing process, we should discuss the advantages of car finance in Pakistan. The first and the most apparent benefit of buying a car on lease in Pakistan is that you get to purchase the most recent vehicle model which you might have not been able to afford on cash payment. This not just makes you own the latest edition of the car but also cuts down the maintenance cost which you would've otherwise needed to pay had you opted for used car finance. Lastly, you are set free from stressing over market price fluctuations; when the monthly car installment is agreed between the parties, it stays fixed regardless of how and when the prices of that car change in the market.

Types of Car Finance

There are multiple ways to lease a car in Pakistan. Listed below are the primary ones:

  • Personal Loan

A personal loan could give you enough cash to purchase a vehicle altogether. You'll then take care of the advance throughout a set time span, normally at a decent interest fee.

One benefit of an individual loan is that it's unstable, meaning you don't need to utilize a resource (like your vehicle or house) as security. Security is the payment the bank can persuasively ask for on the off chance that you can't reimburse them. An unsecured loan means less risk for you, however more gamble for the bank, so you might require a decent FICO assessment to get supported.

It's occasionally more straightforward to get approval or a superior rate by applying for a credit that is gotten against your vehicle. Notwithstanding, you might lose the vehicle on the off chance that you can't stay up on reimbursements.

  • Hire Purchase

With a car hire purchase arrangement, you'll typically put down a deposit to take the vehicle. You'll then, at that point, make monthly installments towards the expense of the car, yet you won't really own it (or have the option to secretly sell it) until the last installment has been paid - alongside an additional 'choice to buy' fee. This is not quite the same as purchasing a car on installment from bank with an individual advance, for instance, where you'd purchase the vehicle outright toward the beginning of your reimbursement plan.

  • PCP Finance

In a personal contract purchase (PCP) arrangement you'll have the choice to pay a portion followed by fixed month to month reimbursements throughout a set timeframe (commonly 240-28 months).

Notwithstanding, toward the end of the decent term, you'll have the choice to either hand the vehicle back, utilize the  deposit for your next vehicle, or acquire responsibility for the vehicle by paying the Guaranteed Minimum Future Value (GMFV) (otherwise called an "expand installment").

There will be a provision in your arrangement which states what the greatest yearly mileage on the vehicle can be. Would it be advisable for you to surpass the greatest yearly mileage, or the vehicle is likely to harm that isn't classed as broad mileage, there might be charges set by the bank.

You can track down additional data around charges in your underlying money understanding.