Last updated: 27/07/2020 | Estimated Reading Time: 4 minutes
Top reasons to buy a car on finance
Buying a car, whether it's brand new or used, can be overwhelming financially. Working out the best way to pay for it largely depends on your financial situation. Even if you do have large sums of cash at hand, purchasing a car on finance may still be the better option. This is mostly because the different finance options (e.g. personal contract purchase, hire purchase, leasing, and personal car loans) provide budget flexibility. But let’s take a look at other top reasons why you should consider financing a vehicle.
In This Guide:
- You won’t have to pay a large sum at once
- You can get a better car
- It will help to improve your credit score
- Car finance can be tax deductible
- It’s better for budgeting
- No collateral is needed
- Do you need vehicle finance?
You won’t have to pay a large sum at once
The reality is that most of us do not have access to large sums of money to pay for a car in cash and even if we do have savings, we do not necessarily want to dig into them if it can be avoided. Financing a vehicle spreads the cost of an expensive item over several months, making it more affordable.
You can get a better car
Because car finance allows you to pay off a vehicle monthly over many years, you may now find it within your budget to afford a more expensive and higher quality car. If you were paying cash, you would only be able to purchase a vehicle that falls into your cash budget at the time.
Having a newer or better-quality car may also mean that you will not have to pay for as may car services and you can also rest at ease knowing that you are driving a car that has better safety features.
It will help to improve your credit score
Whether you choose a personal loan or an HP contract to help you finance your car, then you’ll find that your credit rating improves as you continue to make regular payments. As long as your payments are made promptly and none are missed, then financing a vehicle will provide you with a good opportunity to demonstrate your ability to manage credit well and to stick to repayment schedules.
Once you have an excellent credit score, then financial companies will more readily approve future loans that you may want to apply for. This especially applies to those who are new to the credit market. You can still apply for car finance with a bad credit score, but you will find it harder to get the best deals.
Car finance can be tax deductible
If you own a business and you purchase car finance under the business’s name, then the finance costs may be tax-deductible.
In the UK, tax relief will vary in accordance with the way the car is financed. For example, if you buy a car through your business using a hire purchase agreement, then the only acceptable company expenses are the interest payments. Your business can also, however, claim capital allowances to lower the overall costs of the car by reducing taxable profit.
It’s better for budgeting
With a good car finance agreement, you will know exactly how much you owe and when the instalment will be deducted from your account. This makes it much easier to budget for future expenses and will also help you with any future savings that you’re working towards.
Having a good idea of where you stand financially will also give you the insight you need to negotiate a finance deal on your terms.
No collateral is needed
To get a car financed, you won’t have to put anything down as collateral. This is because your car will automatically serve as the collateral for the loan. This means that if you do not manage to make all of your payments, then you won’t stand to lose anything else other than the vehicle that has been financed.
Keep in mind that failing to make your payments can lead to a bad credit rating, which you want to avoid at all costs.
Do you need vehicle finance?
If you’re on the lookout for great car finance deals, then you’ve come to the right place. At Money Expert, we’ll help you to find the best finance options suited to your lifestyle and your budget. Fill in our short form and tell us a bit about what you need, and our advisers will be in touch to help you set up a finance plan.