There is so much thought that has to go into deciding to buy a car. There is so much research to do. Looking into the right make and model for you isn’t the only thing you’ll need to consider; many other questions have to be asked, including how much tax must be paid each year and what the cost of the insurance is going to be.
Something else that you should think about is how you’re going to pay for the car. There are several different options, and each one has its own advantages and disadvantages; read on to find out more about the main ones to think about so you can determine the right one for you.
Pay Outright
The cheapest, although potentially most difficult, way to finance a new car purchase is to pay the entire cost right at the start. Much like you would go into any shop and pay for your purchases there and then, this is the principle here; you pay the entire cost of the car and drive it away. The most significant benefit of this is that you don’t have to budget for any monthly repayments, and you won’t have to pay any interest, meaning the car is technically cheaper. It’s also yours immediately, and the finance company won’t own it.
The downside is that you have to have money available to begin with, and that can be a difficult thing to do; even cheap cars will still cost a few hundred pounds, and often a few thousand. One way to ensure you have the money is to sell your current car to Sell My Car Direct. You then take the money and go and buy a new car with it.
Personal Loan
If you don’t have a car to sell and you don’t have any savings to use, obtaining a personal loan to purchase your new car can work very well. Ideally, you’ll need to shop around until you find a great interest rate so that you’re not paying too much more than if you paid cash, but remember, it might be possible to switch the loan to a better rate later on, saving you even more.
When you get a loan, the lender will pay you a specific amount of money, which you can use to pay the car owner or dealer. You then have to pay that loan back over a set number of months, at a fixed price. Although taking no debt is best avoided if you can, if you can’t help it, then the fact that you can budget easily with a personal loan is a useful factor.
Hire Purchase
Hire purchase, which you’ve probably heard referred to as ‘HP’ is very similar to a personal loan. Essentially, a finance company will buy the car on your behalf, and you’ll pay them back each month. The difference between HP and the loan is that HP is linked directly to the car, and if you don’t pay, the finance company will take the car and sell it to pay off your debt.
Also, you won’t own the car until the last payment is made, so if you need to sell it for any reason, you would have to pay the final figure to the finance company first.