From hire purchase (HP), to personal contract purchases (PCP), the automotive market has catered to those on a budget over the years. Whether you’re a businessperson seeking a car with excellent fuel efficiency for your commute, or you’re looking for a family car that can handle the school run, very few of us have the funds available to buy a new or used car outright.
For this reason, there are a number of cars available under a vast array of finance schemes, ensuring that owning a car can be a more accessible venture. While interest rates and insurance and fuel costs should always come into consideration, monthly payment schemes can reduce that upfront cost and spread out the pressure considerably.
Whether you’re looking for short term loans to cover the costs after a recent car breakdown or you’re looking to buy your first car, purchasing a car via a finance programme could help to relieve the financial pressure considerably. Here, we’re digging deeper into why a car finance program may be the right option for you.
If you’re on a restricted budget but are in need of a new or first car, a finance scheme could make it more accessible and affordable. There are a number of different finance schemes available, including hire purchase, loans, loan without a guarantor in the UK, leases, personal contract purchases and more, each of which may appeal to some budgets or incomes more than others.
- Hire Purchase – Hire purchases, also known as instalment plans, see the price of the asset paid off in instalments (plus interest).
- Loans – In these cases, you will be taking out a loan to pay off the full cost of the car, before paying back the loan amount in instalments (plus interest)
- Leases – Leasing cars will allow you to pay for and drive the car for (usually) three years, but you won’t own the car at the end. You can, however, start another lease with a new car. These can often work out more expensive, however.
- Personal Contract Purchases – Similar to leasing, you’ll pay off instalments for the car and at the end of the contract, you can choose to either make a final payment to own the car, or hand it back.
You’ll also need to look into drivability, the overall cost of the car, how long it will take to pay off, insurance costs and interest rates too. Finance schemes can be a way to spread out the costs over 12, 18, 24 and sometimes 36 month periods dependant on the company. Interest will build up over time and so while the monthly cost may be lower on longer-term schemes, the overall cost will likely be higher.
When using a finance scheme, you’ll often get a number of perks, such as regular servicing, as standard. This is not only beneficial for you as a car owner should anything go wrong, but this allows the car to be checked over and repaired by trained professionals should anything go wrong or need amending. However, should anything break or go wrong with the car while in your ownership, you’ll need to be aware of the fact that you can only visit a certified dealership for the repairs. The parts will often need to be specific to the model and make, which can work out more expensive than using an external party.
With a range of financial schemes available there is a contract that could be for you when looking to find a brand new car. It is even simpler nowadays, with easy application online and the use of financial tools to help you budget and determine affordability. As with any loan or form of credit, always check the terms and conditions, ask if you have any questions and be certain that you can afford to pay back the monthly amounts before agree to any financing. Would you consider financing your new car?