Purchasing a new car – whether you opt for a secondhand vehicle that still has plenty of miles on the clock, or a brand-new model that still shiny and brimming with potential, can be an exciting experience. Unfortunately, before you can begin enjoying the wonders of your new car, you’ll need to start thinking carefully about how you’re going to arrange the financial deal you need to cover the costs associated with getting your wheels on the road.
Most people spend a number of hours comparing the different models and makes of car that they want before they head to the dealership, yet those people don’t spend nearly as much time figuring out what their best options are regarding finance and loans. Unfortunately, paying more than you need to borrow the cash for a car could mean that your vehicle ends up taking you over your budget each month – leading to debts that you’d rather avoid.
If you want to get on the road the right way and make sure that you’re spending the least amount possible on your new car, then you need to compare and contrast your available options, from car financing to loans.
What Kinds of Car Finance Are There?
The first thing to remember when you’re checking out the different financing options available for your new car – is that all financing options are loans. You will need to pay back the money that you borrow over a fixed period of time, and there is usually some kind of interest to consider too.
Hire purchase plans are one of the most common options for people in search of an easy way to buy a new care. These plans require you to place a deposit in some manner and commit to a specific number of monthly instalments that will help you to pay for the car you are purchasing. With a hire purchase plan, although you’ll be able to drive the car from the moment you sign up for your agreement, the vehicle won’t actually belong to you until all of the instalments have been paid.
The biggest threat in a HP plan is that your provider will have the right to take your car away from you at any time if you start to fall behind on payments. However, repossession does take time and it’s often a last resort solution. In most circumstances, you’ll first get a written notice that will give you a chance to pay off the arrears owed. If you cannot pay that money, then a specific court order will be required before you can have your car taken away from you. Importantly, you will not be able to sell your car to someone else before you have made the final instalment in your HP. What’s more, ending the agreement early is likely to prompt a penalty.
Using Personal Loans and Credit Cards for Cars
If you’re not interested in a hire purchase plan to help you get your new car, you could always consider options like personal loans and credit cards instead. A low-rate loan is often a fantastic way of paying for your car, and many people think that it is generally a better idea than paying for a hire purchase agreement. With a personal loan, you can always sell your car if you end up not having enough money to keep up with your repayments.
However, the lowest rates for personal loans are generally given to people who take loans between £7,500 and £15,000 in value, which means that you might want to consider adapting your loan request according to these numbers. If you need to borrow a particularly large amount, however, you might find that offering an asset as security allows you to get a lower interest rate. Just remember that if you default on the repayments with a secured loan, your home could be at risk.
Alternatively, for cheap car purchases, a credit card that offers a limited 0% of interest for a certain amount of time could be a good choice. Of course, you will need to be very careful with the way you use your cash if you choose to accept a credit card. If you do not pay the money owed before the 0% interest rate ends, you could end up dealing with very high interest rates.
In alternative circumstances, you could always consider a leasing agreement instead of a personal loan or credit card. Leasing agreements are a form of long-term rental contract which you use to pay a monthly fee which allows you to drive your car for a certain number of miles. These are often popular with people who want to drive a new car without paying large amounts for it upfront. Sometimes you will be given the option to purchase the car you drive at the end of your lease.