We know that finding the initial money to pay for the car you have had your eye on is not always straightforward. This is why we thought it would be a good idea to get the opinion of an expert on what the different, and most sensible, ways of paying for your next vehicle may be.
Below, you will find some invaluable advice from the team at Money.co.uk, an unbiased comparison site that allows users to check the cost of many different financial products – including car insurance, mortgages, loans, and more – from a wide range of providers for free. If you are unsure of what the best way to pay for your next car is, we recommend reading through the below advice:
“If you have the cash to pay upfront for a new car this can seem like a good option. Before you put all your savings into a vehicle, however, you should consider whether you have enough left over for emergencies if anything were to go wrong after paying for your car.
“Paying in cash means you won’t owe anyone anything and you’ll own your car straight away. You won’t be charged interest or credit card fees and you’ll have nothing to repay every month. However, you do need to factor in the fact that your money will no longer be earning interest once you’ve spent it on your car.
“Personal Contract Purchase (PCP) deals are growing in popularity; this is where you put down a deposit and pay monthly fees for a set amount of time, usually 2 – 4 years. At the end of your contract you can either hand the car back and walk away, pay a lump sum to buy the vehicle outright, or part exchange the vehicle for another one.
“Hire purchase plans allow you to pay a deposit and make monthly payments to spread the cost of your car. You won’t own the vehicle until your last payment and the monthly repayments will generally be more than a PCP deal but it’s likely you’ll put down a smaller deposit.
“You could take out a personal loan to buy your vehicle. This would make it easy for you to budget, knowing you had a set payment coming out of your account each month. Your borrowing isn’t directly associated to the vehicle and you might get to choose the loan term you want, depending on your credit score. You would need to make sure you can keep up with your payments and the interest you pay will depend on your credit score and how long you choose to spread the payments over. Depending on what type of loan you get this could be an expensive way of paying for your car. Be sure to work out the total cost of your borrowing when you take into account the interest you’ll pay.
“If you use a credit card to buy your car you will own the vehicle outright straight away – but you will owe your credit card company the balance. If you use a 0% purchases credit card and split the payments over the interest-free period you could have the balance cleared by the time the deal ends if you are strict with paying off a certain amount each month. If you aren’t good with money this might not be the best idea, because your car could wind up costing you twice as much if the interest on your credit card kicks in and you have no way to pay it off.”
If you want some further advice from the experts at Money.co.uk on this subject, check out the informative YouTube video they created: https://www.youtube.com/watch?v=z1WxFoUndps