With the market for both new cars and used cars ever growing, we are spoilt for choice. Many people, however, have their eyes set on a particular model. Going after your dream car can be an expensive endeavour, but the feeling of driving off the forecourt in your dream car is like no other. Join us to find out how you can afford the car of your dreams without breaking the bank.
Option 1: Credit card
Before going down this route, make sure you speak to your car dealer first as some dealerships do not accept credit card payments.
A benefit of credit card purchases is that your credit card company can give you added protection on the full purchase cost (often as long as the value of the vehicle is over £100 and less than £30,000). Of course, you have to be able to meet your monthly payments too.
If you buy a car in this way, you’ll be allowed to put down an even lower deposit than 10% and pay the remaining money off using a debit card. It’s best to consider all options here, as often the interest that you pay on a credit card could be significantly higher than that of a finance agreement.
Option 2: Hire purchase agreement
This method involves monthly payments with the option to purchase the car at the end of your agreement based on its new value.
The standard deposit to pay when purchasing in this way is 10%, but it is always an option to pay more and have less to pay off later. The rest of the car is then payed off in instalments over a period of one to five years. The longer this period, the less you have to pay each month but due to interest charges, the total cost of the car becomes higher.
Option 3: Personal Contract Purchase agreement
This option is quite similar to opting for a hire purchase agreement. In this scenario, the end value of the car is agreed at the start of the contract, so you can plan your payments accordingly. Payments are often less than what you’d pay in a hire purchase agreement as you pay the full price of the car, plus interest but minus the guaranteed future value of the car. You must pass credit checks before you’re eligible for a PCP agreement.
If you can afford it, it’s a good idea to put down a larger deposit, therefore lessening the amount you have to pay back monthly. Saving a lump sum for a large deposit is easier than saving up for a car, while reduced monthly payments can really help out too. Always evaluate your current monthly payments before you agree to a finance agreement, as being behind on your payments can lead to financial issues.
At the conclusion of your PCP agreement you have two options. You can either pay off the future value of the car to become the full owner, hand back the keys or trade the car in as a deposit for a new finance agreement.
One thing you must be aware of with this agreement is the danger of exceeding the forecasted mileage. If you exceed the mileage on the car, there will be further charges to pay. This is because more miles decrease the value of the car. Also, any damage to the car will be charged to you, so you must be prepared to take good care of the vehicle.
Considering all the options, your dream car isn’t as far out of your grasp as you might have thought. As we can see, there are a range of finance options available to you for purchasing new cars — allowing you to drive that dream car you’ve always wanted without forking out loads of cash. Save up what you can for a significant deposit and always make sure that you can cover the payments before signing any agreements.