What Option Should You Use to Buy a Car?
If you’re thinking about buying a new car then it’s likely that you’re currently swamped with options. Budgeting for buying a new car is hard, and at times it can be really difficult to work out exactly what you can and can’t afford. From buying the vehicle outright to leasing, there are a number of ways you can finance yourself. Here, we look at the pros and cons of each.
Paying it off upfront
Buying a car upfront yourself is the easiest and cheapest way to buy a new car… and it can also save you filling in a lot of paperwork. Additionally, if you pay off the full amount immediately, some dealers are willing to negotiate a cash discount. However, the cost of a brand new car can run into the tens of thousands of pounds, so saving the money can take years. In addition, by spending all your savings at once, you’ll lose the interest you’ve been gaining on your bank account.
Getting a loan from the bank
If you get a loan from the bank you don’t have to spend all your savings at once and can instead spread the payments over time. If you’ve banked with the same bank for many years, then you may also be able to get a preferential rate on a loan, but even if this isn’t the case, you’ll be able to shop around for the best deal. Plus, because you’re paying the dealer upfront, you may still be able to negotiate a good discount.
However, there are still negatives to a bank loan. The cost of getting credit varies and it can be quite high if your credit rating’s poor. If you don’t have the ability to buy outright, bank loans are a great option, but be willing to shop around for the best rate. Blindly going with your own bank may mean you get a bad deal.
Hire Purchase Agreements
Hire purchase agreements are really easy to arrange with your car dealer and it’s likely they already have a scheme in place. Although these are (generally speaking) more expensive than a bank loan, you have the added luxury of being able to return the car part way through the payment plan, making it a good option if your living circumstances may change. In addition, you don’t own the car until the final instalment is made, so be wary the car may be repossessed if you don’t pay.
Finally, leasing can be a great option if you’re after low monthly payments, and some specialist companies such as Car4Leasing include servicing as part of the deal if you want it to be all inclusive. If you’re someone who enjoys swapping cars regularly, they’re also a great option as you can change without buying or selling. However, you’ll have to keep in mind that you won’t own the car and may have a mileage limit.
So there you have it, a quick rundown of the positives and negatives to the various ways you can buy your new car. Which one will you choose?