Looking for a new car in the new year but wondering which is the best way to get the most bang for your buck? Everyone’s financial situation is different. Considering 2020 has affected many people negatively, so what is the best way to fund your next car?
If you’re a keen saver then paying for your car outright or with cash is a great option to buy your next car. Some of the main benefits of buying your new wheels with cash are that you won’t pay any interest on monthly payments. That means, in the long run, you would save money. You will also become the automatic owner of the vehicle. Which means you are free to sell or part-exchange your car at any time and font have to stick to any milage or excess charges which can occur with some finance deals. A savings fund can also be beneficial. If you have previously been refused car finance as there is no need for a credit check.
A personal loan is a great way to fund your next car. Within a personal loan agreement, you can use the amount agreed to buy anything, so you are free to choose the car you want within your budget. A personal loan is usually provided by a bank or building society and can be one of the cheapest ways to fund your next vehicle, usually as long as you have a good credit score. A personal loan can also usually be obtained online with minimal effort, but some monthly costs can be higher than other finance deals.
A really straightforward choice is a hire purchase car finance deal. Within a hire purchase car finance deal, you usually put down a 10% deposit however there are also many no deposit options available and then pay off your agreed loan in instalments with added interest. The loan is secured against the car so this means that if you fail to make repayments then the vehicle will be taken away from you. It also means that you will only become the legal owner of the vehicle when you have made all the payments till the end of your agreed contract term.
Personal Contract Purchase (PCP)
This type of agreement is similar to Hire Purchase where you make regular monthly payments up till the end of your agreed term. However, at the end of your contract terms, you have three options. You can either hand the car back, use the resale value to get another car and PCP deal or pay the final balloon payment and own the car outright. PCP deals tend to have lower monthly payments and low deposits. But, they can have mileage limits which may result in additional charges.
Credit cards can be a great way to fund your next car as it can be really cost-effective. You can either use your balance to pay for the car outright and become the automatic owner of the vehicle or you can use it to find a deposit. If you’re taking out a new credit card to buy a car then it’s best to look for a card with has a 0% interest rate. Using a credit card means you can make the payment schedule more flexible, you could either choose to pay the minimum amount or more each month.
What to consider:
If you take out any type of credit agreement like the ones listed above, then you should be committed to making the payments each month. A credit agreement is a legal agreement and failure to pay can result in a lower payment score, a County Court Judgement, defaults or even bankruptcy. Only take out a car finance deal that you know you will be able to pay back. If you are struggling to make repayments, speak with your lender directly to see how they can help.
You could also consider using a car finance broker to help sort your finance for you. A car finance broker compares a range of finance lenders for you, so you don’t have to. They then match you up with the most suitable lender with the best deal and then help you get a vehicle within your budget.
If you’re struggling to get approved for car finance then you could consider increasing your credit score for a few months prior to application.