It is something that is an essential part of our everyday lives – the car. What would we do without it? Unfortunately, the price of owning our much-needed vehicles is rising all the time, and with it comes the headache of establishing the best way to finance this kind of purchase.
As you may be aware, more and more people are turning to car finance as a way to get their hands on the latest models and specs without having to stump up thousands beforehand to drive it away.
Car finance, for a lot of people, is an easy way to get a car that may be unaffordable for them otherwise. With the cost of even the smallest cars going over the £10,000 mark, not a lot of people have this kind of money spare and are unwilling to put it down on a vehicle. With car finance, these cars become affordable and are financially manageable on a monthly basis.
The most popular way to pay for a car at the moment is through a Personal Contract Purchase – this has particularly become the norm over the last five years with more people seeing the benefits of what the deal can offer them. But is it for everyone?
Primarily, the benefit that tends to lure people is the option to keep the vehicle or swap it at the end of the purchase period. This is a big plus for many people. They can experience the car and see if it has had any problems. If the car has been problem free for the purchase period, a lot of people would be tempted to buy the car outright at the end of the period – it’s basically like a lengthy trial period that you couldn’t have experienced had you paid for the car in cash. If it is a problem car, it can be handed back at the end of the purchase period, no questions asked.
It isn’t all fun and games with PCPs, however, and you should be aware of some of the terms and conditions that come with this type of lending. Monthly payments will be based on the information you give with regards to mileage. If you say that you are a low mileage user and then you take the car back at the end of the period with mileage higher than average, you can expect to get stung with fees. The condition of the car at the end of the period will also have some bearing on whether you get a good deal back at the end. In a way there is a lot of pressure to keep the car as new as possible, so even though you are the owner for a set period, you may always have a pressured feeling that a lot of money rides on the condition of the car – ultimately you may feel like you don’t own the car at all.
Some people are still using personal loans to buy cars – and there is equally nothing wrong with this. A lot of the time, personal circumstances will dictate which finance option is chosen and for some people a personal loan is still the way forward. There are also many benefits to this method also. With a loan of this type, if you want to, you are able to pay the cost of the car off in full. This isn’t possible through a PCP. Also, it is highly likely that you will be able to select where you get the loan from meaning that you can pick the repayment options including loan term – all the things that best suit your circumstances.
Then there is the option of a cash purchase. This option is fast becoming a lesser favourite, namely because of the reason we gave at the beginning of the article – the very fact that cars, even small cars, are costing thousands upon thousands. Not many people have that kind of money laying around and even if they did have they probably wouldn’t want to spend it all on a car. However, a cash purchase may become an option if you are buying a car second hand that is a few years old. Cars depreciate and a very good reliable car can be less than £5,000 at just a few years old. This means that if you have this kind of sum available you may wish to buy the car outright. This way there are no monthly burdens hanging over your head and the car is yours, no-one can take it away. Credit scores also won’t be affected and there is no hassle looking after the car and worrying about how many miles are on it at the end of every month.