When looking for a new vehicle, there are many different available options for purchasing. Some of them are more suitable than others depending on the circumstances.
Many people use financing options to buy cars, even amid global crises. However, the different ways of buying can be overwhelming and consumers even struggle to pay off their car financing plans.
What’s more, some vendors use car financing options to take advantage of consumers. So, it’s important to understand what’s available and what to look out for.
Here’s our breakdown of the different ways that you can buy a car.
Buying outright is generally the cheapest option since it involves no additional interest costs on top of purchasing the vehicle. It’s the ideal option for first cars and cars under £5000.
However, paying for a new model outright may put you in a financially vulnerable position due to the large one-off payment involved.
Getting a car loan
If you want to buy the car outright but don’t have the lump sum on hand, you can opt for a bank loan for the car. This will allow you to pay in full using money from the bank and then repay them in more manageable monthly instalments.
This option has the additional benefit of allowing you to own the car right away and sell it whenever. You won’t be stuck in a 3-year plan where you can’t change your car – unlike the next option.
Financing the car
By financing the car from the dealer, you will pay the total cost incrementally over a fixed period of time. You’ll also pay monthly interest, meaning that in total you’ll pay a sum greater than the original cost of the car.
This option lets you break down the total cost into monthly payments, meaning that you don’t need a big lump sum to buy the car – though this advantage comes at a price.
Leasing a car is a cheaper option than buying. It lets you drive a car from a dealership for a fixed amount of time and miles, paying for usage rather than ownership. This is a good option if you aren’t interested in keeping, owning or selling the vehicle.
Another flexible option for buying a car is a personal contract plan. These let you pay in monthly instalments, as well as choose between keeping the car, returning it or using the money that you have paid to go towards your next vehicle.
The bottom line
Before deciding which option is best for you, make sure to do your due diligence. Be certain that you can afford any monthly payments, as well as running costs such as insurance, tax and maintenance, for the full duration of any loans.