When it comes to buying a new car, one of the biggest decisions you’ll need to make is how you’re going to finance it. There are pros and cons for each option, so make sure you assess all of your finance options before you decide one way or another. No matter which option you choose, it’s important to make sure you’re getting the best deal. If you’re after a loan, you can compare lenders and rates with Driva.
Buying with cash is definitely the most straightforward way to finance your new set of wheels. It’ll also end up being the cheapest option in the long run, as you won’t need to pay interest or lender fees on it. However, there are also a couple of drawbacks to this method that you need to consider.
Firstly, you’ll need enough money saved up for the entire purchase price of your car. You can’t borrow any of it, so don’t forget to budget for this before visiting showrooms. Secondly, what if you want a very expensive car? Saving for a car is no easy feat, and if you don’t have enough cash to pay for your dream vehicle it’ll either mean waiting a while or settling for something more affordable.
These are both similar options where you get the option to buy the car at the end of an agreed finance term. This might be for between one to five years, depending on what’s available to you. Hire purchase is the more expensive option, but it does come with the benefit of being able to finance bigger ticket items.
This alternative gives you the benefits of an agreement whereby you have access to a vehicle rather than owning it. It also comes with the benefit of typically being a lot more affordable than hire purchase options. The main downside is that you’ll need to return the car at the end of the agreement period, and you won’t be able to buy it.
If you’re struggling to find enough money for a deposit then this is another option that might work for you. Basically, the lender will take the car as security and sell it if payment isn’t made on time. So long as you make all of your payments on time and the car remains undamaged, you’ll be able to keep hold of it. Because you’re giving your lender a large amount of security, you’ll be able to access a lower interest rate than with an unsecured loan.
An unsecured loan is the cheapest way to finance your car, but you need to be careful about being sold unsuitable options. They are available for bigger purchase prices too though, so whether you want a brand new or used car this option could work for you. You’ll pay interest on these loans, and it might end up being a higher rate than with other options.