There are a number of different ways you can finance the purchase of a new car, each having varying benefits and pitfalls. The first thing you will need to do is get an idea of how much money you need to borrow. Check out the cost of the cars you have in mind and their cost and look into your personal finances to see how much of a deposit you can raise. Some companies may require a deposit on your part.
Hire Purchase or Conditional Sale
The dealer will agree with you the value of any exchange vehicle and required deposit and then contact a motor finance company on your behalf. They will pay for the car once you have been approved. You will then have to make agreed monthly over a specified time and only once the full amount is paid do you own the car.
Personal Contract Service (PCP)
Here, once you have been passed any credit checks, the motor finance company will pay for the car. You make monthly payments with an agreed figure being differed until the end of the contract. At this point you have three options, you can either pay the final figure and take ownership of the car, hand the car and keys back to the dealer or use the car as a deposit against another vehicle.
Personal Leasing (Personal Contract Hire)
A leasing agreement allows you to rent the car over a specified period and will usually include all servicing and maintenance costs. The finance company pays for the car and you pay a monthly loan fee. At the end of the contract there is no option to purchase the car. You must however be careful not to exceed the agreed mileage on these deals.
This is perhaps the first thought people have when looking into financing a new car. You arrange the borrowing with the bank or personal lender and take on a personal loan. With a personal loan you will own the car from the offset and are responsible for paying for servicing, repairs and maintenance. You can sell the car at any time but will still remain liable to pay off the loaned money until the agreement is completed.
Mortgage Top Up
It may be possible for some people to raise the required money by drawing on any equity they have in their property or by getting a second mortgage on the house. Here too you will own the car from the start and will be responsible for its care and maintenance costs. You are also entitled to sell the car at any time but again will still remain responsible for paying off the loan within your mortgage payments. Any failure to keep up payments can mean you risk loosing your house.
A possible option but one you should only use for short-term borrowing or to put down a deposit. Interest rates for credit cards make them much more expensive and last over a longer period.