If you’re new to buying cars, it can seem that there are many options that are available. Knowing which one will be right for you is key to ensuring you get the best deal for your money. With that in mind, we at Car Articles took the time to consider the most common choices that you may face when buying a new motor. How did you last buy your car and did you use cash or a loan?
Buying a car privately with cash or savings
Now of course, there are private vehicles being sold in a whole range of price brackets. Take a look on Autotrader and you’ll see everything from rare sports cars to simple ‘just passed my test’ hatchbacks. We’ll use this category though to consider the straightforward cash purchase. So you’ve seen the ad, you’ve seen the car and you’ve got the readies in your hand. There’s nothing wrong with a little negotiation. Just remember however that cash payment does not give you the protection that an agreement or (credit) card purchase would do. Nonetheless, it is a great way to bag a bargain car! You’ll feel good about not having to pay any interest too.
Obtaining a loan to buy a car
There are a whole range of companies now offering to provide a loan so you can finance a car. Go for one of the better known ones and if you have a decent credit rating you should be able to obtain a low interest rate. The advantage of having the loan in place prior to visiting the dealership means that you could make a deposit in cash and there’s also then no nervous wait or delay when it comes to your purchase. According to new credit rules, you should be able to pay the loan off earlier in order to save some of the interest. Alternatively, some loans may carry early repayment charges, just as mortgages do. Check your agreement before jumping in.
Buying a car with Hire Purchase (HP)
Hire Purchase is a loan that is secured directly against the value of the car. This in practice means that if you default, the car will be taken away and the depreciation will still be owed. The benefits of a Hire Purchase agreement are that they can be easily obtained and usually from the car dealership too. Flexibility in length of service and a low deposit may mean this is a good option for you.
Using PCP (Personal Contract Purchase) to buy a car
PCP or Personal Contract Purchase is quite similar to a hire purchase agreement in that you’ll have a monthly payment to cover the cost of your car. The difference is that instead of your payments buying the car, it is effectively a rental agreement for around 2-3 years that has a balloon payment attached at the end. If you choose to pay the balloon payment at the end of the period you can keep the car. Alternatively, you can trade it in at a value offered by the dealer to obtain a new car again. If the car is in a condition the dealer expects, you can hand it back to the dealer without any further payment. PCP is a good way in which obtain a new car if that’s what you’re looking for, without necessarily spending a large amount on monthly payments.
Business Contract Hire Options
Business car leasing or business contract hire is a great way to finance a car if you require one for work. It is an agreement between a trading business and a finance company. Servicing, maintenance etc will be included in the agreement for a set cost. The finance company owns the vehicle throughout and the company taking out the hire pays fixed monthly payments. For a business, it’s a good option as repayments can be claimed as an expense, VAT can be claimed back and as depreciation is not a factor it makes good cash flow sense.
So there you go – a wide range of options that are hopefully clarified a little from this guide. Please get in touch in the comments section if you need any help or advice.
From my first hand experience, it’s always best to use cash. No more worries about what the future may hold. Lol. But seriously, if you can, why not right?