Four Ways to Buy a New Car
A new car is probably the second biggest purchase you’re likely to make, after your home. With many finance options available to pay for it, it can be a daunting prospect to find the right deal, with a payment schedule that fits in with the rest of your outgoings. Here’s a closer look at the ways that you can buy your new car.
1. Hire Purchase
With a hire purchase, you’ll pay an initial deposit (which will be around 10% of the car’s price) and then pay off the entire value of the car in monthly instalments. It’s a flexible way to finance your car, with terms from one to five years. Just remember that the longer the term, the more interest you’ll pay.
2. Personal Contract Purchase
Like a loan, you pay a deposit and monthly instalments. However, if you want to own the car you’ll pay a balloon payment at the end of the deal. This is perfect if you’d prefer smaller monthly payments as you’re not paying off the full value of the car and you won’t own it before the balloon payment.
At the end of the deal, there are three options – you can either make the final payment to take ownership of the car, hand the car back and walk away, or start a new finance deal on a new car.
3. Personal Loan
A personal loan from your bank could be the cheapest way of borrowing money to buy a new car. You can shop around for the best interest rate and choose a suitable loan period to fit with your other expenses. Also, unlike some other methods of payment, you’ll own the car whilst paying off the loan so you could always sell it if you got into financial difficulties.
However, be careful if you are planning to take out a mortgage because a personal loan may affect your credit rating.
4. Credit Card
Firstly, you should check if the car dealer accepts credit cards as a form of payment as not all of them do. To pay off the entirety of the car you’ll need a credit card with a high limit and a low interest rate. This may be tricky if you don’t have a good credit rating, but it’s not impossible.
If you find a card with 0% interest for a fixed period, or a good deal on a balance transfer card, then you could potentially be saving hundreds of pounds in comparison to HP, LP or PCP.
Use this guide to consider carefully which method of payment is the most suitable for you – whether you need one with smaller monthly payments, or if you’d like to own the car from the first payment. That way, you can enjoy your new car without paying over the odds for it.