So, you’re buying a new car? What next?
You’ve decided you’re getting a new car. Whether through need, or want, you’ve started the search for the car that’s right for you. Only now do you find out the true extent of the cost.
At first, you may balk at the price of the car nowadays, yet there are ways in which most people can afford to buy a car. Outlined below are some of the main points that should be taken into consideration when planning the purchase.
– Make sure you can afford it! – It’s not only the car you will be buying, you have to remember there will be petrol/diesel to buy (unless it’s electric), insurance to purchase and breakdown/service costs to cover.
– Compare interest rates – make sure you shop around to find the best interest rates available so you end up paying less overall.
– Compare total cost of borrowing – it’s not just interest rates you have to worry about in this case. Administration fees also apply at the start and end of the contract terms.
Ways to pay
It’s time to get down to the nitty gritty and start to lay out all your payment options and assess which one is right for you. There are plenty of different ways to pay for a car, and more often than not, these are negotiable, especially if the car dealer wants the sale!
Personal loans are seemingly available everywhere nowadays. From the AA, to the local bank, the personal loan market can be quite saturated. This loan will allow you to buy the car outright and will leave you with an asset at the end of it. Personal loans are usually the cheapest way to finance a car deal, but only if you have a good credit rating. Make sure to shop around for the lowest APR (Annual Percentage Rate).
• Can cover all, or part of the car’s cost.
• Can be arranged over the internet, phone, or face-to-face.
• Plenty of comparison websites available to contrast each lender’s offering.
• Competitive interest rates if you shop around.
• Most lenders offer instant bank transfers, but some may have small waiting periods, which could be of inconvenience.
• Other borrowing may be affected.
• Applying and getting rejected for loans can reflect negatively on your credit score.
Comparison websites are everywhere, such as moneysupermarket.com or confused.com
Hire purchase (HP)
Hire purchase is where the car is bought on finance over a period of 1-5 years usually (12-60 Months). Usually, with this type of deal, you have to place a deposit down, which is usually around 10% of the final price. These are arranged by the dealers and are mainly used for the purchase of new cars. Until the payments have ended, you will not own the car.
• Flexible payment terms – this mean that you can adjust the number of months in which the Hire Purchase is arranged over. Evidently, the longer the term, the less the payment will be per month and vice versa.
• Easy and quick to arrange – as these are arranged by the dealer themselves
• Competitive interest rate – Some dealers have interest rates even as low at 0%, make sure to look around.
• You will not own the car until the final payment
• The shorter the term, the higher the monthly payments
With a mileage limit, you can pay the dealer a fixed amount per month for the use of the car. This will result in you not owning the car at the end of the term but will result in lower payments per month.
• A lot simpler to work out, with service and breakdowns paid for in the deal
• The car won’t depreciate in value, and you won’t have the worry about trying to find a buyer at the end
• Flexible monthly terms- usually anywhere from 1-3 years
• You, at no stage, own the car
• Extra costs if you exceed the mileage
• Still need to pay a deposit
There are plenty of ways to buy or lease cars nowadays, and it can be tricky to know which option is right for you. Look around, it may take a few hours, or even days, but it could save you hundreds if not thousands of pounds per year.