Unless you reside in an area with reliable public transportation, having a car available any time you need it is crucial. A car enables you to get to and from work, errands, and other social activities. Unless you can walk around to do those things, a reliable vehicle is your ideal bet. However, a car could be the second costly thing you will buy after your home. Thus, figuring out financing is essential. Here are a few options for financing a new car without getting into debt or paying more than you should.
Cash and Savings
The easiest and most affordable way to own a new car is to purchase it in cash. If you can pay for the total cost with your bank savings, you’ll get the vehicle outright and won’t have to worry about dealing with a bank or another financier. The only caution you need to take when choosing this option is to ensure the purchase doesn’t deplete your entire savings.
Hire purchase is another popular option for financing a new car whereby you make a deposit, usually 10%, and then clear the balance in installments over a fixed period. It’s an easily secured car loan with competitive rates. However, you don’t own the vehicle until you make the final payment.
Personal Contract Plan
A PCP (personal contract plan) bears a resemblance to a hire purchase. It involves paying the difference between the original selling price and the resale price at the end of the tenure, usually one to three years, in monthly installments. When the term ends, you have some options. First, you can hand over the vehicle to the dealer and leave. Second, you can pay the resale price and maintain ownership.
Alternatively, you can opt to do cash for cars, where you trade in your car and get into a similar agreement with a new vehicle. However, if you purchase the vehicle on a personal contract purchase, the car belongs to the financier during the contract. Therefore, you cannot sell the vehicle, and you can even lose it if you fail to repay.
Loans are one of the simplest options for financing a car, as long as you have a good credit history. Most car buyers make the mistake of financing a new car using their credit card or assuming the finance option given by the dealer is the best. Nevertheless, a personal loan offers a better value, not to mention you can arrange it online with minimal effort.
With a personal lease, you’re required to pay a certain amount every month, for a certain period, usually three years, which includes servicing and maintenance. This means you don’t have to worry about depreciation, and you’ll know how much to allocate each month. Nevertheless, the shortcoming of this option is that you’ll not own the car when the lease term ends. In addition, there’s a considerable deposit involved, and you risk paying extra charges if you exceed the agreed mileage limit.
Purchasing a car is among the significant purchases you will make in life, so it’s imperative to do it right. Although the process of shopping for a vehicle can be exhilarating, you also should be realistic and sensible concerning what you can afford. With the financing options outlined above, you have the opportunity to find the lowest monthly installments possible or reduce the overall cost of owning a new car.