Car Financing

Everything You Need to Know About Car Financing

The challenge with buying a car isn’t about finding the right model as it is about knowing how to pay for it. When it comes to paying for your new ride, there are plenty of options available to you. Choosing the right payment method is important, so weigh your options well and take time to think it all through.

Here are some of the more popular ways to pay for your car.

Cash Payment

Buying a car with cash is one of, if not the most cost-effective, ways to pay for a new car. Paying with cash keeps you from having to worry about monthly instalments.

Personal Loans

Taking out a personal loan from a bank or other similar establishments allow you to spread the cost of your vehicle over a period of time. This payment method allows you to own your new car off the bat, but getting approved for a personal loan can be difficult if you have a bad credit rating.

Hire Purchase

This payment method requires you to make an initial deposit of around 10% of the total cost, then a series of monthly instalments spread over an agreed period. Unlike with personal loans, the car isn’t yours until the final payment is made.

Car Leasing

Think of car leasing as long-term rental. With this method, you make fixed monthly payments to use the car until the lease expires. There are two main types of car leasing: Personal Contract Hire, or PCH, and Personal Contract Purchase, or PCP. With PCH, you’ll never own the car, whereas with PCP, you have the option to make a balloon payment that essentially transfers ownership of the vehicle to you.

 

Other Payment Methods

Credit Card Payment

Using your credit card to pay for your car, whether partially or in full, gives you added protection on the full purchase cost. That is, as long as you pay a minimum of £100 via credit card, and you meet all of your monthly card payments.

Peer-To-Peer Loan

This is similar to personal loans but instead of borrowing money from a bank, you get the loan from friends and family, or from individuals through websites such as Zopa. While peer-to-peer loans don’t go through traditional financial institutions, you still need to have a good credit score.

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