Plan on getting a new car? If you're not paying cash, you're probably looking for the best way to pay for the car you want.
People who buy a new car every two or three years are more likely to use personal contract purchase, or PCP. After you pay a 20–25% down payment on a car, the dealer or manufacturer gives you a loan for the rest of the cost. At the end of the deal, a set price for the trade-in is promised. A limit on the number of miles you can drive each year will be set, and as long as you don't go over it, you'll have a choice of what to do when the contract is up.
What you can do will be
To give the car back and get a new one.
- To trade it in at its used value, which may be more than the guaranteed amount, making it a good idea to do.
To keep the car, you would have to pay off the rest of the loan.
Many people just go with the first option and buy a new car every couple of years from the same dealer or manufacturer.
A simple car lease plan is an alternative to buying a car on your own. The first payment is a deposit that is equal to three months' worth of rent. The rent is then paid for 24 or 36 months, depending on the contract. When the time is up, you just give the car back and walk away. You don't have to do anything, so you can go ahead and choose your next car without having to worry about selling a used one.
To compare costs using the two methods shown above, if you bought a GBP14,995 car from a dealer on a 3 year plan with a personal contract purchase plan, you would pay a GBP1,548 deposit. The loan would then be paid back over 36 months at a rate of GBP309 per month. If you stayed with the same dealership, the deal would give you GBP3,861 toward a new car. You could also buy the car outright for this amount and sell it or use it as a down payment on a new car.
If you choose the second (lease) plan for the same car, you would pay GBP969 for the first payment and GBP323 each month.
Personal loans and hire purchase are two other options for paying for a car. With hire purchase, the car is used as collateral for the loan. Since this is the case, if you fall behind on your payments, the lender can take the car back. Obviously, once you've paid off the car, you own it outright at the end of the period. There are no strings attached, and you can drive it as much as you want.
There are offers of low-cost or even free credit. Most of the time, they're not available on the model you want. As with many other companies, Vauxhall has some great deals. For example, right now you can buy several models with no interest for four years. For models that aren't in the 0% range, like the Astra Life 1.6 16v, the offer is much higher. In fact, it doubles the interest rate that most people pay when they get a loan through GMAC, which is the company that lends money to people who buy from Vauxhall directly.
You don't have to go with the deals offered by the manufacturer. You can do your own comparisons by looking at the costs of personal loans. Go online and find a broker to find out about the different loans that are out there.
When it comes to financing, most car companies can offer good deals, so it's worth finding out what's available for the car you want. It's always a good idea to check how much the same car would cost with a personal loan, and it's always worth it to look at the total cost.
So, whether you choose a personal loan, hire purchase, personal contract purchase, or a simple lease plan, there are many ways to pay for your new car. If you do your math right, you can save a lot of money.
