I’m a car expert – here’s the ultimate guide to finance options for your motor that could save you a FORTUNE
IF you’re looking at finance options for your motor, there’s plenty of options available.
Car experts have shared the ultimate guide to getting the best deal for you.
Most drivers rely on finance options to get them on the road.
There are 3 main types of car finance – personal car loans, Hire Purchase (HP), and Personal Contract Hires (PCH).
But it’s important you know what’s what, so you can make an informed decision.
cinch, an expert in online car trading, has broken down each finance option using its ‘Help Me Choose’ tool.
Here’s a guide to how each works – and if it could be right for you.
Personal car loan
One of the simplest ways to finance your new car is through a car loan.
It involves borrowing money to buy the motor.
You will need to work out how much you need from the lender – a bank or building society – as well as how long you want to borrow the money over.
Once your application is approved, the requested amount will be transferred into your account, and you can nab the car of your dreams.
You’ll then repay the loan in instalments over the agreed term.
While the interest rate will vary from lender to lender, a good credit score should keep your percentages down.
This option is great for a travel-mad family with a pet – the car is yours from the moment you get the keys so there are fewer restrictions.
With other options, you have to hand the car back in good condition and within an agreed mileage limit.
But with a personal car loan, you can drive as far as you like, and if the car picks up any damage to the interior, there’s no expectation to have this fixed unless you want to.
It could be a great option if you have kids – or even pets.
Hire Purchase (HP)
HP is a handy option which lets you spread costs over monthly payments – until you finally own the car.
Unlike with PCP car finance, you don’t need to make an end-of-contract payment to secure the car, but an ‘option to purchase’ fee will be included in your final payment.
HP repayments might be slightly higher than with other options as you’re making regular payments to eventually own the vehicle.
But on the upside, it won’t penalise you if you don’t have a good credit history.
HP finance is secured against the value of the vehicle, so if you’re unable to stick to your monthly instalments, the finance company could take the car back.
Plus, it has no mileage restrictions – great for long distances and travels.
Experts recommend this option to graduates and young professionals, as well as others without a high credit score.
Personal Contract Purchase (PCP)
The third great option, with PCP finance, you won’t own the vehicle during the agreement – it will instead belong to the finance company.
You will be asked to put down a deposit and pay regular instalments over the agreed term.
If you decide it’s time to give up your motor, you can simply hand it back or part-exchange for something new.
It’s great for young couples, or anyone else looking for flexibility and variation.
Personal Contract Hire
Personal Contract Hire (PCH) – also known as car leasing – gives you the chance to rent a vehicle for a number of years before returning it at the end of the lease term.
With PCH finance, you’ll pay a deposit and stay on top of regular instalments.
Most agreements will last from two to five years – the longer the contract, the cheaper the monthly repayments.
You can also add servicing plans to your lease, which will help you keep the car in good condition and avoid expensive fines when it’s time to hand it back.
PCH is the perfect option for drivers who are keen to try different cars in a cost-effective way – great for professionals.
Car leasing also comes with warranty and road tax included, for a real faff-free experience.
There’s plenty of other advice available for anyone buying a new car.
Experts at online car traders, cinch, have taken a look at some handy tips to keep an eye on your finances and help you find the best car for your needs.
Meanwhile, motorists have been advised to ask five key questions when buying a used car to avoid being ripped off.
A global chip shortage is hindering the production of new cars, meaning second-hand motors are in high demand.
Plus, new research has revealed the top ten models currently available in the UK with the most miles on the clock.