What Are the Best Ways to Finance a Car?

When you make the decision to buy a car, you will have put a lot of thought into it. You will have researched makes and models, insurance costs, whether there is tax to pay, even what colour you want to have, but what about the overall cost of the car? Have you considered how you want to pay for it? You don’t (always) have to pay the full price up front, and even if you do, there are a variety of ways to raise finance for it.

Cash

The cheapest way to finance a car purchase is by using cash. Loan agreements or finance plans will have interest attached, which mean you end up paying more than the cost of the car over the life of the loan. Therefore, paying with cash – or a banker’s draft – means you don’t have that worry. It also means that as soon as you hand over the money, the car is yours to do as you want with (as long as it’s safe and legal). If, for example, you needed to sell the car next week, you can do – there won’t be any restrictions. If you don’t have enough money to purchase the car fully using cash, then another option is to pay as big a deposit as possible using cash, and finance the rest. It will make your loan shorter, and less expensive. The problem with paying for a car in cash is that you could run the risk of draining your savings, and if you need the money for an emergency fund, it won’t be there.

Hire Purchase

Hire purchase (HP) is similar to a loan, only the amount is secured against the car. You won’t own the vehicle until the last payment is made, which means you aren’t able to sell it before then, even if you desperately need to. Despite that, however, HP is a convenient way to buy a car as it is usually arranged by the car dealership themselves. It’s quicker than getting a loan, and can all be done in house. Make sure the car dealership is a reputable one such as Eastern BMW, and this might be your best bet when it comes to securing a deal on a car.

Personal Loan

Personal loans can be a great way to finance a car purchase assuming you can get a good interest rate. Your bank will lend you the money, and then you can pay the car dealership the full amount in cash. You will then pay your bank back a set amount each month until the entire loan has been repaid. Try to get an unsecured loan if possible. They tend to be more expensive (there is more risk to the bank), but a secured loan is secured against your home, and if you can’t pay it back for any reason, your property will be at risk. It’s good to shop around for the best rates – as long as your credit score is good, you should have a lot of choice.

Do Your Homework

No matter which option you choose to finance your car, make sure you can truly afford to buy it. Compare all the costs of the different methods of borrowing and weigh up the pros and cons before committing to something. There will be a method that is best for you, and it’s just a matter of working out which one it is.