Whenever you go to buy a car, it’s important that you have an idea in mind of how you’re going to finance the purchase.
You might be looking to go for a full cash deal; you might have a bank loan already in place to utilise or you could be looking at an option direct from a dealer using car finance such as car leasing, hire purchase or a loan. The problem for a lot of people is that they don’t actually know what options they have available to them, generally because they automatically assume they’re going to be using just one option or they’ve only got one option available to them.
Therefore, if they don’t know what their options are, how can they be sure that they’re choosing the most suitable one for them?
Whether you’re in the process of looking for a car at the moment or you simply want to know which avenues you can go down when you do decide to purchase a new car, there are two main points to keep in mind to help you work out the best way to obtain a new car..
1. Determine your budget – Can you buy the new car outright or will you need to use car finance? If you need to use car finance what is your monthly budget?
2. Work out how long you want the car for – some people love to have brand new cars, exchanging their car for a newly registered model once every 2 – 3 years. Other people prefer to keep their car for between 5 and 10 years, ensuring that they get the most from their money.
If the new car that you are looking at is within your budget and not expensive, and you have the cash and you want to keep it for longer than 5 years then using 100% cash is the attractive route.
Conversely, if the new car that you are seeking is an expensive, upmarket vehicle that you don’t have enough cash to buy it outright then you will need to use car finance. If you want to own the car and keep it for longer than 5 years then it is best to use a loan or hire purchase. If you want to change it in 3 – 5 years then car leasing is the best option as it can be up to 50% cheaper than a loan or hire purchase.
Therefore, it’s important that you keep the length of time in mind when looking at finance options.
There are websites that help you make comparisons on car finance based on the cheapest monthly price. These websites reveal that if you’re looking at keeping the car for 5 years or more, it could be worthwhile paying for it with some type of loan or finance agreement over a 60 month period (assuming a cash purchase isn’t possible). Should you only be looking to keep it for less than 5 years comparison websites will reveal that a car lease agreement might be the better option, as although you don’t own the car outright, you can trade it back in for a new model after the leasing period has finished.
There are various ways to buy a car and not all will be suitable for you. However, rather than just opting for what seems to be the most common route, consider your needs and take a look at what’s available and you might be pleasantly surprised.