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5 ways to buy a car and how to decide which is best for you


When you’re in the market for a new car, it can be hard to know which the best way is to buy one. When car finance first hit the market, there were limited agreements available but now, there are three main types of car finance which tend to be the most popular and if you can afford it, there’s always buying with cash too. So, let’s take a look at the top 5 ways to buy a car and help you decide which would suit you best. 

1.     Cash

Usually when it comes to buying a car, cash is kind and don’t get us wrong it can be the most effective way to buy a car! This is because there will be no interest to pay on top of your payment and you will be the owner of the car straightaway which means you can modify it or sell it when you’re ready. However, both brand new and used cars can now cost thousands of pounds to buy outright which means many people would need to clear their savings or spend a long time getting the money together. If you have some money in your savings and don’t want to use it all on getting a car, you could instead think of putting this money towards a car finance deposit instead to help make your payments more affordable.

2.     Hire purchase.

Hire purchase is a form of car financing and is probably the most straight forward. You borrow a set amount which equals the value of your chosen car with interest and make equal monthly payments till the end of your chosen term. HP deals usually last between 3-5 years and can be catered to suit your budget. Hire purchase is a form of secured loan which means that the lender owns the car until the final option to purchase fee has been paid and then ownership will be transferred to you. HP can be great for financing second hand cars over brand new cars as the cost of the car is split into payments and choosing a costly car can be expensive.

3.     Personal loan

A personal loan is an unsecured loan which means you borrow money from a lender, and it isn’t secured against an asset. Unlike HP, the money you wish to borrow would be deposited in full into your bank account and you can use it to buy a car from a dealer or private seller just like a cash buyer! You then make monthly payment till the end of the agreed term. Once the deal has ended, there are no more payments to make, and you will have owned the car from the start of the deal as you bought it outright. If you sell the car before the finance has ended though, you will need to continue to meet the repayment schedule, unless you choose to pay back the finance early.

4.     Personal Contract Purchase

Personal Contract Purchase (PCP) is actually a form of hire purchase but has a very different structure. Within a PCP deal, instead of spreading the full cost of your chosen car, you instead cover part of the value and much of the cost is differed until a final optional payment. This helps to make the monthly payments on PCP deals much lower than other options and gives you more freedom and flexibility to change your car more often. If you want to own the car, you can do so but will need to pay the balloon payment first.

5.     Credit card

You can also choose to buy a car on a credit card too but it’s worth checking with the dealership first as some don’t accept this form of payment. If you’re looking to put a car on your credit card, it can be beneficial to get a card with 0% interest rate for the longest possible period. If anything goes wrong during your purchase, a credit card also means you are protected by the consumer credit act. Interest rates on credit cards can also vary depending on how much you’ve spent and also how much you pay off each month.

Andrew Mcaffrey