5 Ways To Pay For Your Next Car And Which Is Best

Buying a car is one of the biggest purchases you will make. In recent years, the cost of new and used cars has risen, making it harder for drivers to obtain a vehicle. With this in mind, you may be wondering what the best way is to buy a car.

Depending on your personal situation, you may be better suited to one way to afford a car over others. The most common way nowadays to buy a car is through finance but unfortunately, car finance can’t be guaranteed to everyone.

If you’re wondering what the best way is to buy a car, the guide below looks at the top 5 options and helps you decide if it’s right for your circumstances.

Cash

Buying a car with cash is the most traditional and cost-effective way to get a car. It means you own the car from the start, you can buy from a dealer or private seller, you don’t have to worry about any mileage or modification restrictions, and you can sell the car when you’re ready.

There’s also no interest to pay and you can have more negotiation power when buying too. The only drawback of buying with cash is saving up enough money to buy the car.

Even second-hand cars can be thousands of pounds to buy, and many drivers may not have this kind or disposable income, or it could take quite a long time to save up.

Credit card.

If you’re thinking about using a credit card to buy a car, it can be worth looking into 0% interest credit cards to help make your deal cheaper. You can pay for a car with a credit card, at the dealer’s discretion and pay it off each month over.

A 0% interest rate credit card will usually come with a fee-free period and once the period is up, you will be charged an agreed interest. It can be a cost-effective way of financing a car if you pay off the value within the interest-free period.

Before committing to this form of purchase, it can be worth checking with the dealer first as some may not accept this form of payment.

Personal loans.

A personal loan can be offered by banks and building societies and aren’t secured against the asset you buy. This means you could shop for a car just like a cash buyer as the lender agrees to deposit your loan into your bank account.

You then make monthly payments back to the lender over an agreed term. Personal loans can be harder to obtain if you have a low credit score and banks usually reserve the lowest APR rates for better credit applicants.

It’s worth noting here that because the loan is secured against the vehicle if you sell the car, you will still have to meet the repayments until the end of the term or use any money from the able to settle the finance or make an overpayment.

Hire purchase car finance.

Hire purchase car finance can be obtained in a number of ways, you can apply with the lenders at a local dealership if they offer it, use a free car finance broker or find a suitable deal from a trusted online lender. Hire purchase is a secured loan which means the asset is used as collateral if the customer fails to repay.

If the lender accepts you, they buy your chosen car from the dealer, and you slip the value of the car with interest into equal monthly payments over the agreed term. Once all payment has been made and the term has ended, the car is yours to keep!

All you need to pay is a small option to purchase fee which is usually quite similar to the monthly instalments you’ve paid through the term so no nasty surprises! HP can be offered on both new and used cars but can equal higher monthly payments than other options.

Personal Contract Purchase (PCP)

Personal Contract purchase is another form of car finance and it’s a secured loan just like hire purchase. However, their structures are completely different. PCP finance offers low monthly payments and more flexibility to change your car.

Many drivers don’t go into a PCP deal with the intention of owning a car. You can own the car at the end of the deal, but you would have to pay a larger balloon payment to take ownership.

Alternatively, you can also choose to hand the car back to the dealer or use the value of the loan towards a new car on a new PCP agreement.

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