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Ways to pay for your new car

Used MINIsDeciding to buy a new car can be really exciting, but working out how to pay for it can be hard. We’ve teamed up with to give you the options available…


If you have a lump sum of money already saved for your car, then using cash can have an advantage as you’ll own the car outright straight away. This means you won’t be charged interest on your purchase. You also won’t need to worry about making monthly repayments.

Before using your savings make sure you’d still be able to manage if something went wrong. It’s important you don’t leave yourself high and dry.

PCP (Personal Contract Purchase)

This is where you pay a deposit upfront and then pay monthly repayments which usually last between two and four years.

When you come to the end of your deal, you can either:

  • Give the car back
  • Pay the rest of the balance off so you own the car
  • Part exchange the car for a new one using any equity you have

If you decide to pay off the balance and buy the car, it’ll cost the guaranteed future value (GFV) that was agreed at the beginning of your PCP deal. PCP deals are a good option if you want to change your car every few years.

It’s also worth remembering that the finance company is almost always the legal owner of the car if you take out a PCP deal. You are the registered keeper of the car, but not the actual legal owner.

Hire purchase

This is where you pay a deposit upfront and then pay off the rest of the car’s value over a fixed period with the intention that you own the vehicle by the end. You don’t own the vehicle outright until your final payment.

These are good if you don’t have much of a deposit, however it does mean monthly repayments are often more expensive than PCP plans.

Personal loans

There are a few advantages to using a personal loan:

  • You own the car straight away by paying up front
  • You get to choose the loan term
  • You have set monthly payments

The total cost of the loan depends on the interest rate. Compare interest rates before applying and check the terms to see if there are charges for repaying in full early.

If you’ve got bad credit a personal loan is likely to be pretty expensive so other options should be considered. Take a look at a comparison site to see how much a loan could cost you and then compare it to your other options.

Credit cards can save you money

Credit cards

The type of credit card you use can make all the difference. It can be a cost-effective way of buying your car outright if you plan it and make your credit cards work for you.

Your options include:

  • Use a 0% purchase credit card to pay for the car and then split the repayments over your interest free period so you pay it off before you get charged interest.
  • You can pay on a cashback or reward credit card and then use a 0% balance transfer or use your savings to pay it off before you get charged interest.
  • Always check if you’ll be charged a fee before using a credit card. The fee could mean it isn’t the cheapest option for you.

In summary

How to pay for your car really depends on your own personal circumstance and whether you have any savings or not.

You should always make sure that you’re positive you’ll be able to afford whichever option you choose so that you won’t be leaving yourself in a sticky situation.

About Gareth Herincx

Gareth is a versatile journalist, copywriter and digital editor who's worked across the media in newspapers, magazines, TV, teletext, radio and online. After long stints at the BBC, GMTV and ITV, he now specialises in motoring.

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