What Is The Best Way To Buy A Car? - Money Expert

Your car is probably the second most expensive thing you will buy after a home. This means that you will want to do your homework before delving into your pockets. Whether you’re buying a new or used car, our advice below will give you the insight you will need to choose a financing option that won’t leave you with sleepless nights.

What is the cheapest way to buy a car?

The cheapest way to buy a car is generally to fund all or part of it in cash. Not many individuals have access to such large lump sums of money, however, and this is when financial assistance becomes an option. But the number of differentcar finance options can be overwhelming and choosing the best deal that’s suited to your lifestyle can be a daunting task.

To make sure that you choose the best way to buy a new or used car for you, you may want to scrutinise the following financial options.

Personal contract purchase

If you plan on changing cars every few years, then apersonal contract purchase (PCP) may be a suitable option for you.  With this type of car finance, you will pay a deposit (usually around 10%-20% of the vehicle’s value), low monthly instalments, and one lump sum (referred to as a balloon payment) at the end of the contract.

As an alternative to paying back the lump sum at the end of term, you can hand the car back to the dealer, trade it in and sign a new contract or sell it privately to clear the balloon payment. Those are the options that will be available to you if you do not have access to cash to clear the final payment.

The advantages of a Personal Contract Purchase are:

Hire purchase

When agreeing to ahire purchase contract, the steps involve paying a deposit (usually between 10% - 20%) and then repaying the balance, plus interest, in monthly instalments until the term finishes. You will own your car when the last payment has been made.

Keep in mind, however, that if you miss a payment, your finance company has the right to reclaim your car. With this option, interest rates can also be quite high but you will not have to pay out a lump sum at the end of the term.

The advantages of a Hire Purchase agreement are:

Leasing (personal contract hire) 

Under a lease agreement, you lease the car and hand it back to the dealer at the end of your agreement term. You pay the dealer a fixed monthly instalment for the use of a car (usually with servicing and maintenance included) – and there’s no deposit required.

Depending on the deal you are offered; Personal Contract Hire can cost more or less than Personal Contract Purchase. However, you’ll have greater flexibility to switch providers and because service and maintenance costs are included, you may save money either way.

The advantages of Personal Contract Hire:

Bad credit car finance

The ways in which a person can buy a car are seemingly endless and most options will accommodate the purchasers’ needs well. But what if you have a bad credit rating? Will the above options still apply? Having a low credit score can reduce your chances of securing the best deals, but there are still a few simple things you can do to improve your chances.

For example, in the UK you can:

ClickHERE for more information on how you can get car finance with bad credit.