No matter what car you want to buy, unless you practice the age-old art of bangernomics, buying old cars and running them into the ground, then you’ll be looking for some sort of car finance.
There are a whole host of options, including a loan or PCP plan from the dealer, then there’s a bank loan. Leasing is becoming increasingly attractive, too. So with so many options, which one is best for you?
Well there really isn’t a simple answer to that one, you have to really analyse each deal and see how much it actually costs.
The first point, though, is to never totally trust the information on offer at the dealership. There may be incentives or pressure to sign something straight away, but don’t fall for it. Insist on taking the paperwork away to weigh up the pros and cons against other forms of finance. It may still turn out to be the best form of finance, but it might not.
Then look at your savings. If you’ve got money stashed away and you’re making almost no return on that money, why not use them to avoid major repayments? It can work out much cheaper in the long run and if you’re a cash buyer then you can even negotiate a better price.
If you don’t have the savings, a straightforward bank loan can often be the best way to go about car financing a new car, especially as you can shop around for some excellent rates at the moment. Hire Purchase is the other main option, but effectively the car is the security for the loan in that case, so you could end up having to surrender the car if you miss payments in extreme cases.
Personal Contact Purchase is the other main option, which requires you to pay a substantial deposit and then low monthly sums for a period of up to three years. At the end of the period you can pay a hefty ‘balloon’ payment and keep the car or, if you follow the dealer’s plan, part-exchange the car for another PCP deal that locks you into their system.
The final alternative is not to own the car at all, but to lease instead. Leasing has really taken off in recent years and aggressive pricing means it’s an option you should no longer ignore. You never technically own the car, of course, you’re more or less renting it. Leasing, though, can get you behind the wheel of a much nicer car for exactly the same amount you’d spend in loan repayments.