Putting up with an unreliable car can be very stressful, especially if you depend on your car to get to work. Many people spend hundreds of pounds trying to maintain older cars and never seem to have enough money to buy a newer, more reliable model. However with buying a car on finance almost anyone can afford to buy a new car. This can be a cost effective option in the long run as you can get a more dependable and economical car that will not cost so much money in repairs or fuel.
Types of Car Finance
There are many different types of car finance available so you should be able to find an option that will suit your budget and circumstances. Here is a quick overview of the options available and how they could benefit you:
– Personal Contract Plans (PCP) – these plans are available from dealers and can provide you with a way to afford a more expensive car whilst keeping the monthly repayments low. This is because the plan is set up into two sections. As well as the low monthly repayments at the end of the plan term (typically 2 or 4 years) you will have the choice of paying a final ‘balloon payment’. This is basically a one-off larger amount and once you have paid this the car will be yours. PCPs also offer another option as if the car is in good condition you could simply hand it back to the dealer under the terms of your plan and walk away (without paying the balloon amount). PCPs are ideal for people who cannot afford to repay a large amount each month or those that would prefer to upgrade their car every few years. It is important to note that this finance deal is secured on the car. This means that if you fall behind with your repayments or cannot afford the balloon payment (and the dealer will not accept the car back) then the car could be repossessed.
– Hire Purchase (HP) – you will probably have heard of HP as this is one of the most common credit products on the market. HP is also available from the dealer direct and is a straight forward financial commitment. You will repay a monthly amount until you have completed the terms of the agreement and then the car will be yours outright. Remember as with PCP this agreement will be secured on the car so if you fail to meet the payments you could lose the car.
– Personal Loans – lots of banks, buildings societies and other lenders offer personal loans. These are not always as competitive as the financing options available from dealers so it is important to shop around and compare deals. With a personal loan you would simply borrow a set amount and repay it back over an agreed number of years at an agreed rate of interest. Unlike PCP and HP loans this credit would not be set against the car. This means you would not automatically lose the car if you fall behind in payments. Personal loans are useful for anyone thinking of buying a car from a private seller.
