Four Ways to a Better Finance Bill New York Times (blog)
26.05.10
But as the House and Senate begin merging their separate bills into a single bill, they still have a chance to make some important improvements. Here are four issues to watch in coming weeks:
DERIVATIVES They’re easy to hate and hard to understand. Derivatives are contracts that allow people to make bets, be it on the price of corn, the future of interest rates or a pool of subprime mortgages.
Their economic purpose is that they allow companies to hedge risk. If soaring fuel prices have the potential to bankrupt an airline, it can buy a derivative that pays off if prices jump. Southwest Airlines did exactly this a few years ago.
Unfortunately, many investors used debt to buy their derivatives. When the value of the derivatives fell, the investors had little margin for error. The fact that most deals were done privately — rather than through a clearinghouse, with prices everyone can see — made the situation worse by creating uncertainty.
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Car Finance Options Explained
When buying a new or used car there are so many options now available. From personal loans to more specialist finance such as Personal Contract Purchase it leaves a lot of options for which to choose from. So what are all the options and which one is right for you.
Personal Contract Purchase
PCP is fast becoming a very popular method of car finance. You pay a monthly amount towards the purchase of the car and at the end of a pre-defined purchase period you can then choose pay a lump sum to buy the car or just return the car with no obligation. This style of finance is great for those people who like to change their car on a regular basis but do not want to pay the full amount for a new car.
Hire Purchase
This is the more traditional way to buy a car. You enter into a contract to buy the car over a certain period of time during which pay the car off in monthly instalments. At the end of this period the car is paid for and legally becomes yours. As a Hire Purchase is effectively a secured loan if you miss any payments then the seller has a right to repossess the car.
Lease Purchase
Lease / Credit Purchase is similar to a Personal Contract Purchase (PCP) in that a lump sum amount is deferred to the end of the agreement. This lump sum reduces the regular monthly payments and allows you to purchase a more expensive care than you thought possible.
Unlike PCP a lease Purchase offers no option to return the vehicle to the finance company at the end of the agreed contract period. It is up to the customer to settle the final balloon payment through additional finance, cash or part-exchange with the finance company.
Contract Hire
This is an agreement where a rental is paid in return for the vehicle over a period of 1, 2, 3 or 4 years. It is ideal if your business prefers to reduce its financial risk by not owning the vehicle and having to deal with the administration with new cars and also worrying about the value of the car over time.
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