So you’ve found the new car you want to buy – now how on Earth are you going to pay for it? The various car finance deals at the modern buyer’s disposal allow you to stump up the readies in a number of different ways. It means you can fund your new car in a manner that suits your financial situation and budget – but which of the many car finance packages should you choose?
You could always whip out the credit card, write out a cheque or even stride into the dealership with a briefcase full of cash. These old-school techniques won’t suit everybody though, and most new car buyers will find a finance plan more manageable and cost-effective over the long term.
Around eight out of every 10 new cars privately purchased in the UK are funded using some sort of finance deal. The available options range from a simple personal loan to hire purchase, personal contract purchase (PCP) and personal contract hire or personal lease. It can get a little confusing, especially when you get down into the jargon-packed small print, but in this car finance guide, we’re aiming to cut through the confusion.
Here we’ve picked out all of the main ways that people pay for new cars in the UK and compiled some top tips and advice to help you decide which car finance method is best for you.
Click the links below or on the top left of this page to get full guides on each of the key car finance options…
Car finance deals: top tips
Five key things to remember when choosing your car finance deal…
1. Shop around Do your research and carefully compare the different types of car finance deals that are available. Look at the APR (Annual Percentage Rate) interest rates and the total cost of borrowing associated with each deal to identify the one that suits you.
2. Don’t stretch your finances Make sure you can afford the monthly repayments on your chosen deal. Don’t over-extend yourself to get that better model and only sign up to what you can afford. Remember that paying a bigger deposit will make the monthly bills smaller and keep the overall cost down.
3. PPI and GAP insurance can be costly You’ll be offered insurance to cover the repayments if something goes wrong but think carefully before taking it out. Payment Protection Insurance (PPI) may help if you’re unable to keep up repayments and GAP insurance will pay out if the car is written-off in an accident with finance outstanding. Both are expensive, however, and cover can be limited.
4. Be aware of additional charges Check the small print and pay particular attention to additional charges that you might incur by making the repayments early or exceeding mileage limits.
5. Keep your credit score up to date Your credit score will in part determine the extent of the finance packages you can get. Requesting a copy of your credit statement and checking it for mistakes is the first step in improving your score. Repaying your loans in advance or above what is required also boosts the ratings. Avoid taking on too many credit loans at once, this comes across as having too many commitments.
Now get our run down of the best new car deals on the market