Buying a car is a big deal for a lot of people as it costs a lot of money which can take, for many of us, a very long time to save. Luckily, if you don’t have all of the money saved for your dream car, there are other options too, such as Personal contract plan purchase and even parking out a personal loan. As it is such a substantial amount of money, choosing an option such as one of these can be more realistic.
Situation dependent, there will be a finance option for everyone when it comes to buying a car. One of the best things you can do is do your research on all of the options and make a decision on which suits you best.
Buying a car outright
Buying the vehicle outright is the most ideal option, but one that not everyone can afford. Even if you can’t pay for the vehicle in full, having savings put away to pay off a deposit or a large chunk of the payment will always be helpful.
Additionally, it is equally as important that if you do pay for the vehicle in cash, that you have money still saved in-case of an emergency. If you’re buying a second-hand car, there is no guarantee that everything will be working smoothly.
On top of this, even if you do have the cash to pay for the car outright, it might be a good idea to pay some of the total amount via credit card to keep you safe. This is because if you use your credit card you benefit from credit card purchase protection if anything were to go wrong. But make sure you pay off the credit card when you can.
Using a personal loan
If you can’t afford to pay for the vehicle yourself but you have a good credit score then choosing to use a personal loan might be a good option.
With a personal loan, you can get the full amount of the vehicle price and buy it out, you will then have to spread the cost over 1 to 7 years. Choosing a loan is often cheaper than payments plans and you can shop around different banks and building societies to find the best interest rates.
It is important to note that as it is a loan, you need to ensure that you will be able to make the repayments and it is not wise to secure the loan again your home as you will be putting it at risk.
Personal contract purchase (PCP)
One of the most popular ways cars are purchased in this day and age is through Personal contract hire. With this you do not own the vehicle and will put a deposit down and then make monthly repayments. You will be making payments based on the difference between the price of the vehicle brand new and the predicted price at the end of the agreement, this means the repayments can be quite low.
At the end of the agreed term you can choose to give the vehicle back and possibly do the same with a new car, hand the car in and pay nothing at the end, or pay a final lump sum and keep the car.
Hire purchase (HP)
Hire purchase follows a similar set of rules as PCP. You will pay approximately a 10% deposit and then monthly repayments over a fixed period of time. You only own the car once the final payment has been made, which is why this type of hire is better for longer term contracts when you wish to keep the car at the end.