Money Matters: 10 Ways To Fund Those New Wheels
Money Matters: 10 Ways To Fund Those New Wheels
For many people their car is almost like an extension of themselves. It goes everywhere with them they rely on it to get from A to Z and for many it mirrors their personality. Whether its a sports car for an extrovert or a safetycentred car for the cautious a persons choice of car can say a lot about them.
But for others the most important feature of a car is its price. Indeed most people arent in a position to buy their car outright therefore its worth looking at the different options that are available to fund that new automobile.
Personal Loan
The first and perhaps most obvious option is to get a personal loan from a bank or other financial institution. This is normally a reasonably straightforward process and is simply a case of shopping around for the best interest rates. Many consumerorientated websites can suggest the current best deals.
As far as the cardealer is concerned this is simply a cash sale and they dont get involved in any of the behindthescenes financing of the car. It might be worth discussing this with the dealer however as it is generally in their interest to sell a car finance plan too as they usually operate on a commission basis. They may be able to offer a hirepurchase deal with better terms than that of a bank loan.
HirePurchase
A hirepurchase deal is likely to be the preferred car finance option of any cardealer given they will receive a cut of the money from the finance company. Although its easy to arrange on both new and used cars the car isnt owned until the final payment is made meaning its not possible to sell the car on until then.
Car Loan
A car loan is similar to a personal loan in most ways except the bank or financial institution may offer a few additional benefits such as the option of taking payment holidays. Usually though a car loan is simply a personal loan with a different name to appeal to a specific consumer market.
Interestfree Car Loan
Whilst this may sound too good to be true it is possible to secure an interestfree loan for a car normally directly from the dealer rather than a financial institution. Naturally however there are restrictions in place. Firstly it is normally only available on new or nearlynew cars. Secondly the repayment timescale will normally be over a relatively short period such as two years.
Furthermore a nearperfect credit history will be needed and large penalties will be in place for breaking any of the terms of the agreement. Needless to say it is prudent to analyse the smallprint carefully for hidden clauses.
Remortgaging the Home
Remortgaging the home helps to release existing equity which can then be put towards anything including buying a new car. Whilst in many ways this is the cheapest way to borrow money due to the lower interest rates there is the potential to still be paying off the car years after it has reached the scrap heap.
Personal Contract Purchase PCP
PCP has become an increasingly popular car finance method in recent years. The main advantage of this system is that it helps to avoid the depreciation trap whereby a new car decreases significantly in value in a comparatively short period of time.
This is essentially a conditional sale agreement. A contractterm is agreed usually somewhere between 2 and 4 years and then set monthly payments are made. At the end of the contract period the car can either be handed back or a balloon payment can be made to purchase the vehicle outright.
Credit Card
Perhaps not the most conventional means of paying for a new car a credit card is actually one of the better options for several reasons. Firstly there are no fixed monthly payments. If for whatever reason finances are particularly tight one month only the bearminimum needs to be paid without breaching any terms of agreement.
Secondly the money on the credit card isnt secured against the vehicle meaning the car is owned outright from the very beginning. Nobody from the bank can come and take the car away.
Thirdly and perhaps most appealingly credit cards with 0 interest for limited periods do exist for anything up to 12 months. Of course the interest may be astronomical after this period but with a cautious approach this can be a very good deal.
Of course the one downside to paying with a credit card is that they typically have limits of only one or two thousand pounds. But if a secondhand car is being purchased this might just be enough to cover it.
Straight Swap
Perhaps not a preferred option for some people doing a straightswap with a cardealer may be a good idea in some circumstances. If the plan is to downgrade an existing car it may be more costeffective to do a straightswap with a dealer rather than selling then repurchasing.
Company Car
A company car was once a staple part of many job packages but has declined in recent years. It may be worthwhile negotiating with an employer for a company car as part of the overall remuneration package. Although tax is paid on it it does save a substantial amount in terms of the initial outlay that is required.
City Car Club
The City Car Club is a relatively new venture. By joining it gives people the freedom of a car when they need one without all the overheads that are typically involved in owning a car. The payasyougo ethos here is a sound one and City Car Clubs are located throughout the UK. But it ultimately doesnt culminate in ownership which is ideal for the more casual car user.
Everybody has different needs from their car and ultimately everybody has different financial constraints. Without question its worth investigating all the funding options as there are many finance plans to suit every situation.
About the writer: Adam Singleton is an online freelance journalist and keen gardener. He lives in Scotland with his two dogs.
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