As if finding the car of your dreams wasn’t hard enough; you’ve also got to worry about how you’re going to pay for it. It doesn’t help that there’s no right or wrong answer. It all depends on your circumstances. The age old debate between buying new or used rages on, but there is a third option that continues to be overlooked. Finance.
It’s a bit of a dirty word, isn’t it? Often associated with those struggling to pay off their debts, financing has become the black sheep of the buying family. It shouldn’t be that way, though. Used in accordance with your personal needs and budget, it could be the right choice for you. The world of finance, however, is a broad and undefined subject. Within it, there are other branches stemming from it.
If you’re seriously considering finance as your best bet for buying a new car, there are a couple of things you’ll need to be aware of. First, what are your options?
Leasing is quite often misunderstood. Usually lumped into the same bracket as general ‘finance,’ it isn’t quite as simple as that. While the monthly repayments are considerably lower than other options, you never outright own your car. It’s more like a long-term rental. You pay a fixed monthly fee for the length of your contract, and then return the car upon its expiry.
Perhaps not the wisest long-term investment, but can be worth it for the cheap monthly payments alone. Then again, you’re not likely to only own one car in your lifetime anyway, are you? Sometimes you’ll be given the option to buy the car at the end of the period, based on how much you’ve paid to that point. Use this car payment calculator for an idea of how much you’ll be repaying each month.
Requesting a personal loan from your bank. I mean, it’s usually your go-to option when you can’t afford an extravagant purchase upfront, isn’t it? If you own a house, chances are it was bankrolled with a mortgage. Why should buying a car be any different?
There are a couple of significant benefits to taking out a loan to buy a car. In comparison to the other finance options, it works out cheaper in the long run. Be aware that the monthly repayments will likely be higher than with other financing options, though.
Rent to buy schemes aren’t anything to scoff at, either. Okay, so the idea of paying for your car without the knowledge that it’s actually yours can be hard to bear. Until that last payment is made, the hire company still owns the car totally. You will need to pay a deposit upfront – usually around 10% to 15% of the car’s value – so you’ll need to have some money behind you.
Of course, you always have the option of buying the car on credit. You’ll need to be aware of rising interest rates, though, as this will affect both how much you pay monthly and overall.