What is the Best Way to Fund Your Next Car Purchase?

What is the Best Way to Fund Your Next Car Purchase

Many people couldn’t even imagine a world without a car to get around, and for others, it can be seen as a luxury. A car can be a lifeline to for drivers and can be integral to family life. Drivers are now spoilt with more ways than ever to buy a car. If you’re in the market for getting a new or used car, you may be wondering what is the best way to fund your net car purchase. It can depend on your budget for a car, your credit score, and what you want from your next car. Read our guide below to help you decide how to buy your next car. 

Buying with Cash

The easiest and most cost-effective way to buy a car is with cash. Paying for a car with cash means you don’t have to pay any interest; you’ll own the car straight away, and you have the freedom to use a dealership of a private seller. When you buy with cash, it could also give you better negotiation terms as the lender sets the price for a finance car, and can be hard to budge. The only drawback of buying with cash is saving up for one lump sum payment. New cars especially can come with high price tags, and it can be hard to save up thousands of pounds to pay for a car. 

Car Finance Options 

Car finance allows you to spread the cost of a car into affordable monthly payments over a number of years. You can choose your budget and term length to suit your affordability, and you have flexibility over car ownership. Car finance does involve a third-party lender to lend you money or pay for a car on your behalf and you will need to pass a car finance eligibility check first. When you apply, you’ll get an instant decision for car finance to see if you’ve been approved or not. This means car finance may not be offered to everyone who applies, so it’s worth keeping in mind before you set your heart on financing your next car. 

Car finance can come in a few different formats, and each has its own structure. You may be better suited to one type of car finance over the others so it can be a good idea to find out more about each before applying. 

Personal Loans

Personal loans can be used to buy a car, but they aren’t secured against the vehicle. A personal loan involves a lender agreeing to give you money, and it gets deposited into your bank account. You can buy a car just like a cash buyer and then pay the lender back monthly over the agreed term. Personal loans can be the cheapest way to get a car on finance because they usually offer low rates of interest. However, they may only be reserved for people with the best credit scores. 

Hire Purchase

Hire purchase is a secured loan which means the lender buys the car on your behalf from the dealer. The lender owns the car throughout the agreement until the final option to purchase fee is paid. It’s one of the most straightforward ways to get a car. The value of the car, interest, and any other fees are split equally over the term. There is a small option to purchase fee to pay at the end of the deal to take ownership of the car. However, the lender does have the right to take the car away from you if you fail to keep up with your agreed payments. 

Personal Contract Purchase

PCP car finance is one of the most flexible ways to get a car, but it can be a little more complicated than other deals. Monthly payments are usually lower because the full value of the loan isn’t split into equal monthly payments. Instead, part of the loan is paid off every month, and at the end of the deal, there is a large value balloon payment that needs to be paid if you wish to keep the car. Alternatively, you don’t need to keep the car and can instead choose to hand the car back to the dealer or use its valve towards another car on finance. 

Buying a Car with a Credit Card 

It is possible to buy a car with a credit card, but your options may be limited. Not all dealership allows credit card payments or if they do, they may not allow the full amount to be paid on card or charge extra fees for using a car.  Before using a credit card to buy a car, check that the card allows big purchases like this to be made and if there is a 0% interest time frame. 

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