Car finance options
- 27 May, 2019
- 5 min read
In a forest of finance options, mega deals and valuation promises, how can you decide which is the best way to buy your car?
Instead of bouncing from “the best” advice to numerous recommendations, why not clarify what options you actually have first?
Here are the 4 main ways of funding your brand new motor – have a look and decide which way is best for you.
One of the most common ways of funding a new car is to take out a finance agreement – and you can take one out in the CarShop showroom if you fancy! So, what are the different finance options?
PCP finance is a form of Hire Purchase (explained later). PCP is the UK’s most popular way to finance your car, and we offer PCP right here at CarShop.
PCP is a form of finance where you pay a smaller amount each month towards your new motor for a contracted amount of time. When you get to the end of your contract, you’ll be faced with a lump sum in order to pay off the car in full and make it yours.
Just so you know, this lump sum at the end of the agreement can be referred to as a “balloon payment” or “minimum guaranteed future value.”
When you get to this point, you have 3 options:
No, we’re not talking about the sauce. HP is another way of financing a new vehicle. There are a few differences between this form of finance and PCP, so keep on reading to get a better idea of which will work better for your lifestyle.
Like PCP, you’ll be paying money each month towards your new motor for a contracted amount of time. Whilst you are paying this, technically, the company still own your car, you are just “hiring” it. But, don’t let that put you off. At the end of the contract, you will own the vehicle, rather than needing to fork out for a balloon payment if you had a PCP agreement.
HP is ideal if you want to own the car at the end of your contract and cannot pay in full immediately, whereas PCP is the best option if you’re likely to be looking for an upgrade at the end of your contract.
This one is on you! Some people go to their bank and take out a personal loan to buy a new car.
You can apply for a loan through your bank and then will have the cash for a new vehicle in your account. You’ll be seen as a “cash buyer” on the forecourt as the money will be in your account to pay for the car in full straight away.
Have you been saving your pennies and have the money in your account? Great!
If you have been saving up for your new car, you may be called a “cash buyer”. All this means is that you’re not looking for finance and can settle the bill there and then.
This is just a little something to think about if you’re buying a new car. (And just so you know, some other places may call this GAP insurance.)
Let’s say the worst happens – you write off your car or it’s stolen - your car insurance is likely to only cover you for the market value of the vehicle. That means that you may not be covered for the amount that you’re still paying for the car as it’s a little older and has a few more miles on the clock. But, with VAP insurance, you can rest easy you’ll get back the cash you’ve invested, and we offer that here at CarShop!