For most people, the prospect of buying a new car can be an exciting decision, as well as a major one in financial terms. The thrill of visiting a car showroom to see which one you want to drive home is a rush which could most closely be compared to that of a kid in a candy shop!
But once you’ve sat in all the cars you want to check out, and made the appropriate brum-brum noises (or is that just us?) you might find that one aspect of buying a car which can prove troublesome is securing the finances for it. It requires some critical planning, and making the arrangements to borrow money can be more than just a hassle – it will usually take a lot of paperwork and lots of stress in order to get the deal you want.
The Finance & Leasing Association (FLA) runs a website which concentrates on the issues which face anyone financing a car – they regulate the companies which lend money to car buyers. It states that any prospective buyer must not purchase one which is beyond their means – if lending the money to borrow the car you must be able to afford the repayments, as well as the costs of its maintenance and upkeep. It’s no good paying the monthly rates if you can’t afford to keep it in good health. The most frequent options taken up for car finance are:
This involves borrowing money to pay for the cost of the car from a company affiliated with the car dealer. The car is paid for by the motor finance firm, and you must undertake monthly repayments for the cost of the car. According to this article in The Independent, you should be wary of any additional APR charges which are quoted in the small print – as with everything else which may surprise you at a later date. The car is yours once the monthly repayments are completed, although the last payment may be significantly higher than the preceding ones in order to keep them affordable – so make sure you’ve budgeted for this bumper instalment.
The main difference between leasing and a hire purchase is that, at the end of the agreement, the car does not belong to you and should be returned either to the dealership or, in some cases, to the finance company itself. It’s widely used by companies for their employees and serves as a very affordable way to get around.
You can, of course, apply to your bank for a personal loan with which to buy the car, and then pay back the bank in monthly instalments. However, most car finance dealers such as carshop.co.uk/car-finance already have competitive agreements in place with the banks, which means it’s probably more worthwhile going straight to the car dealer.