If you’re planning to buy a new car, there are different ways to finance your purchase. To know which financing option is best for you, this quick guide should help you along. Just keep in mind that buying a new car is a major decision you need to carefully think through. There are different factors to consider but the most important of which is your financing deal. Here are available options you can look at now:
Most people who are buying a new car usually do so with a financing plan but that doesn’t always have to be the case. If you have substantial savings that are earning stingy interest rates, you might want to consider using the money to buy your new car upfront. Rather than borrow money at higher interest rates, buying upfront will essentially save you more money in the long run. But keep in mind that this is ideal if you have enough savings left after the purchase. You can’t empty your bank accounts just so you can buy a new car.
If buying upfront is not possible, you can always apply for a personal loan from a bank, a highstreet lender or any finance provider available in the UK. With personal loans, the options are plentiful. There are hundreds of deals available and it’s up to you to pick a deal perfect for your financial circumstance. Just make sure that your loan is not secured on any asset particularly your home. With the right personal loan, you can cover the whole cost of the car. In exchange, you’ll be paying a monthly fee at an affordable fixed rate if you shop around.
Personal leasing, on one hand, allows you to pay your dealer a fixed monthly amount but only for the use of a car, which already includes servicing and maintenance. This means that you’re not going to buy the car, just lease it for the duration you specified. There’s just one caveat. You must not exceed the specified mileage limit. Once the leasing agreement is up, you hand over the car back to the dealer. With this type of financing, the cost may be higher than if you purchase your own car. You’ll also have to pay the 3-month deposit rental. On the upside, you don’t have to worry about the car’s value depreciating with personal leasing.
Hire purchase (HP)
If you don’t have money to pay for the 10% deposit most dealers require, you can always consider financing your purchase through hire purchase. With hire purchase, you’ll pay a monthly installment speed over a 12 to 60-month repayment term. In most cases, you don’t have to worry about raising money to pay for the deposit. This type of financing is not only quick and easy to arrange but it also comes with flexible terms and the interest rates are quite competitive. On the downside, you won’t own the vehicle until it’s fully paid off.
Personal contract plan
Another type or variation of hire purchase is called a personal contract plan. With this type of financing, you won’t have to buy the car upfront. Instead you pay for the difference in sale price and the resale price back to the dealer. Advantages of this type of financing include lower monthly payments, low deposit requirement and flexible repayment terms. On the downside, you may end up paying more in the end than if you opt for hire purchase. You’ll have to consider mileage because it can affect the cost of the car.