So you’ve decided that you’re going to buy a new car. You probably have a good idea of what you’re looking for, and you head down to your local garage to take a browse through what’s currently available. Before you know it though, you’re bombarded with all kinds of jargon from the salesman when he enquires about how you intend to pay for your purchase. There are many options, and it’s important to understand how they all work so you can pick one that best suits your needs. Here, we give you the lowdown.

Credit card

These days, there are all kinds of deals available on credit cards that can make them a worthy contender when you’re looking for ways to pay for your car. If you can strike up an interest free agreement with your provider, it could be one of the cheapest ways to spread out the cost. Of course, there are some potential downsides here. You might find it tricky to take out a credit card with a limit that’s high enough to cover the cost of a car, especially if you’re buying new, and not all dealers will accept a credit card. Make sure you find out before pursuing this option.


This one is pretty straightforward. In simple terms, you lend the money from a bank or a different provider, and you repay a chunk every month until it’s cleared. It’s one of the most popular options, and the beauty is that you know exactly how much you’ll be paying for a set amount of time, so it’s easy to work out your budget accordingly. Loans are not always easy to get though, especially if you have a less than perfect credit rating. Find a provider that can meet your needs, but keep an eye on how interest you’ll be expected to pay. If you have a bad credit rating, you can sometimes expect to pay a higher interest rate.

Personal contract purchase

Many dealers offer personal contract purchase, or PCP as it’s commonly known in the industry. You pay a deposit, then you pay low monthly sums for around 2-3 years. At this point, you’ll usually have paid around two thirds of the total price of the car, and you’ll have three options. You can pay a lump sum and keep the car, you can exchange it for a new car and start a new payment plan, or you can hand it back. The lower monthly payments are the main attraction, but do keep in mind that you won’t actually own the car unless you hand over the larger chunk at the end of the contract. You need to consider whether you’ll have this cash available if that’s what you plan to do. Of course, if you don’t plan on keeping the car, you might want to think about straightforward leasing. This can be a great choice if you only need the car for a short period of time.

Working out how you’ll pay for your car can be really confusing, especially when you speak to a salesman who doesn’t explain things in everyday terms. Take the time you need to work out what’s right for you, and don’t be scared to ask plenty of questions when it comes to dealing with your finance provider. The reputable ones will be more than happy to tell you everything you need to know, and will never pressurise you into making a decision until you’re completely ready to take that leap.