Need to finance your next car? You’re not alone. Nearly 2 million cars are sold in the UK each year, meaning that the number of people looking for financing options or ways to finance their next car purchase is significant.
Thankfully, there are multiple flexible ways to purchase your next set of wheels, ensuring you can afford the purchase without stretching yourself too thin. Let’s take a quick look at these options and what you need to know about each one, empowering you to make the best choice for your situation.
Cash Payment
Paying for your next car purchase outright with cash is a secure option that puts you in control. You will own the vehicle outright and have no payments to make, making it more affordable for your monthly outgoings and ensuring you’re not tied to any financial institutions.
Loan or Credit Card
If you have access to a credit card with a decent limit, you can use this to make the purchase. Look for 0% APR cards that don’t charge interest for a specified period or use balance transfer cards to pay it off interest-free. This savvy approach can save you money, but be aware that you’ll be paying interest on top if you can’t pay it off in time.
A personal loan can help you find your next car purchase. Unlike loans attached to the car, they won’t be repossessed if you cannot afford to make the repayments in the future. However, defaulting on loan payments will impact your credit score.
Specific Car Financing
There are multiple types of car finance options you can choose from to pay for your next vehicle. Working with car finance loan brokers can help you find the right options for your circumstances; however, as an overview, the types of car finance options you might be looking at can include
- PCP
- Hire Purchase
- Leasing
- 0% purchase credit
All of these options come with different terms and conditions, meaning they are not suitable for everyone.
PCP, for example, is a personal contract purchase and works by you making an upfront deposit and then monthly payments over a set term. At the end of the term, you can choose to return the car, upgrade to a new one or make a final payment to own the vehicle outright.
On the other hand, HP finance is a deposit of at least 10% of the car’s value, and you then pay it off in monthly instalments over the contract period. You will own the car outright once you have made the final payment. No balloon payment, which is a large final payment at the end of the contract, is required.
Lastly, leasing a car is a long-term rental agreement, and you need to make an initial payment and then pay a set amount each month for the length of the lease; typically, they’re 2-4 long. You don’t own the car, nor will you, and there are restrictions, including how many miles you drive and upkeep you need to abide by.