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How to Finance a Car Purchase – What You Need to Know

September 28, 2015, 12:42 pm


When it comes to buying a car on finance, there are a wide range of options available to you. However, there are certain types of finance that can only be achieved when purchasing a new car, rather than a second hand one. This can often provide you with much lower rates and work out cheaper than an older, less expensive car.

So, what do you need to know when it comes to financing a car? Let’s explore.

Types of Ways to Buy a Car on Finance

There are a range of options available to you when it comes to financing. The most common ones include:

  • Personal Loan – this is money lent to you from a bank and building society, it is a relatively easy way to take out finance although you will need to scour the market for the best APR. Additionally, you may need to meet certain criteria in order to be eligible for finance from that lender. 
  • Hire Purchase (HP) – a way of purchasing a car using instalments spread over 12-60 months with a deposit put down at the beginning of the purchase. This can be very competitive with new cars, however it is not something that’s often found on used vehicles.
  • Personal Contract Plan (PCP) – a variety of HP where you agree to pay the difference between sale price and price for resale back to the dealer. Payments are typically spread over 12-36 months and you are able to hand the car back to the dealer at the end of the contract without paying anything.
  • Manufacturer Finance – most manufacturers offer a finance purchase option on new vehicles that can often work out cheaper than going with high street banks. They tend to have sale periods which offer 0% finance for a set amount of time, making this option very affordable.
  • Credit Card – if you have a good credit rating then you may be able to purchase a car on credit card, this is great if you have a 0% term but you will need to pay it off within this period or find an account you can switch to without having to pay transfer costs.

Picking the finance option that bests suits you will depend on a range of factors, including the car you wish to buy. You will find that many of these options are far easier to apply to new cars that used ones, often saving you money in the long run on interest rates.


How to Choose an Option

Unfortunately there is no right answer when it comes to picking a finance option, so it’s best to look at the pros and cons of each solution. While we strongly advice that you look into each option in as great a depth as possible before committing, we’ve put together a very quick list of things you should know.

Personal Loan

+ Pro: If unsecured, they can’t repossess the car if you go into arrears on payments.

-Con: Loans can be difficult to get and the APR can be quite high

Credit Cards

+Pro: Added section 75 protection and the ability to borrow for free

-Con: Need a high credit limit in order to make the purchase


+Pro: You own the car outright at last payment, new cars may benefit from deposit contribution

-Con: Hard to acquire for used cars, can have higher repayments than other finances


+Pro: Relatively cheap monthly payments and can have deposit contribution

-Con: Won’t own the car unless you make larger final payment, have to keep

Manufacturer finance

+Pro: Lots of deals to take advantage of, low payments

-Con: May carry high early repayment charges

This is a very, very basic overview. If you want more information on any finance option then it is essential that you look through the literature that the lender provides, this will give you a comprehensive understanding allowing you to make an informed decision.

If you’re looking to sell a car in order to give you more money to contribute to your next vehicle then talk to Cashpoint4Cars today. We buy all types of vehicle at a competitive rate, helping you get the most money for your car as quickly as possible.






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