4 Ways To Finance Your Next Car Purchase

Aside from buying a house, purchasing a new car can be one of the most significant expenses you might make in your life, especially if you’re buying a brand-new car. In 2022, over 1.9 million vehicles were sold in the UK alone, according to Statistica. 

It goes without saying that not every person who is in the market to buy a new or used car can afford to pay for one in full from their income or savings, meaning they need to find alternative ways of financing their latest purchase.

If you want to purchase a new car or a pre-loved motor, these are some of the common routes people take to afford the cost of this endeavour.

Photo by Antoni Shkraba:

Personal Loan

A personal loan is a loan you take out from a lender and repay over a set period of time. It can be used to pay for many things, and what you use it for is entirely up to you. You will then be responsible for paying the instalments for the duration of the term until the loan is paid back in full, including with the interest rate agreed upon in your application.

Credit Cards

Credit cards can be another good option to help you find all or part of your car payment. However, this isn’t as popular an option as others due to the often high-interest rates of credit cards. Still, you can pay them back in various ways: as a lump sum if you can afford it, by paying the minimum payment each month or by paying anything over the minimum payment when you can. It might be an excellent option to consider if you are confident you can repay each month. But it’s worth knowing that some dealers might charge you a credit card processing fee of up to 3%. This can increase the cost of your car and the interest you repay on your credit card until the balance is paid off in full.

Hire Purchase

Hire Purchase is similar to a personal loan in that you make set repayments over an agreed period of time except it’s linked to your car. Typically, you will need to put down at least a 10% deposit when you agree to the contract, and you won’t own the car until the final payment has been made. As the loan is taken out on the car, it can be repossessed if you fall behind or do not make payments unless you have paid for over a third of the agreement.

PCP

PCP or personal contract purchase is similar to HP in that you make monthly repayments; however, these payments are often lower than HP and can be tailored to meet your budget. 

For example, you head to your local hyundai dealer to look at a car, when you decide on the car you want, you can choose the size of the deposit you put down, estimate your mileage, and agree to a repayment duration of 3 to 5 years. You can then choose to defer some of the repayment until the end of the agreement; this is known as a balloon payment. At the end of the agreed repayment term, you don’t own the car unless you make the balloon payment, but you can either trade it in and start again or hand it back to the dealer and not pay anything any more, but you will be left without a car.

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