4 Smart Ways to Finance a Car

For most people in the UK, a car is the second most expensive thing they’ll buy after a house. Very few people can afford to pay cash for their vehicle or own it outright, hence the wide variety of financing options available today.

There’s a lot to consider when buying a car. Are you getting the best price for it? If it’s secondhand, is it in working order and not prone to expensive breakdowns in the long term? Can you afford running costs such as fuel and servicing after you buy it?

No matter if you're considering options like a BMW PCO vehicle for work purposes or a personal Volkswagen, it’s essential to take the time to ensure you’re making the best decisions for yourself in this process

Hire Purchase

With the hire purchase option, you usually need to pay a fixed deposit of around 10% for the vehicle. The remaining amount is then paid off through fixed monthly payments over an agreed time period. You will only own the car yourself once this period is over. This is ideal for new cars, as dealers are more competitive with pricing.

Personal Loan

Through a personal loan, the cost is usually spread between one and seven years. You’ll need a good credit rating in order to deal with the banks or finance providers that offer personal loans. It would be wise to avoid securing the loan against your home, as you otherwise risk losing it if you fail to keep up with the payments.

If you’re low on money and urgently need a car for job seeking or repairs to your current car, a payday loan may be a good option to get an extra boost of cash in addition to other financing methods. If you’re looking for a reputable provider, Cash Lady offers a great online solution that recommends the best loan providers based on your details. Applications are quick, simple and secure.

Lease

The terms of a lease usually involve paying the dealer monthly with included service and maintenance. One potential downside is that there’s often a mileage limit. The car does not belong to you and you have to return it at the end of the lease period. If you prefer trying a new vehicle every few years instead of sticking with one, this is an ideal way to go.

Personal Contract Purchase

While the total amount that you put back is often higher, this financing method is cheaper than a hire purchase agreement in terms of monthly payments. You receive a loan for the difference between its current price brand-new, and the predicted value at the end of the agreement.

This is largely based on the forecasted annual mileage that you’ll be putting in. Once the term ends, you can either trade the car in and repeat the process, hand it back to the dealer and pay nothing, or make a balloon payment for its resale price and keep the car.

As for which financing option is best for you, it largely depends on your current situation. Consider your savings and income in order to determine what you can afford per month and where you’ll be at the end of the agreement.