When it comes to choosing a new used car, the choices can feel like they’re endless. The huge number of manufacturers, models, engine types – not to mention the dizzying array of finance options available.
Whether you’re visiting a used car dealership to find your next motor or purchasing from classified listings, there’s plenty to think about.
And with used car prices on the rise, how you pay for your next set of wheels has never been more important.
Let’s take a look at some of the main options available to you.
Personal Contract Purchase (PCP)
With a PCP deal, you will make regular payments over a time period usually between three and four years. At the end of this term, there will be a final payment to make the car yours. You also have the option of returning the car to the dealer at this point and going elsewhere.
Benefits of PPC
- The flexibility to leave at the end of the contract. Many dealers may also entertain an early trade-in if you want to sign up for a newer model.
- Payments are generally lower than other forms of finance as the ‘balloon’ payment at the end holds value.
Drawbacks of PPC
- Longer terms can tie you into the car for longer than you might like.
- You won’t own the car while you are in the repayment arrangement.
Hire purchase (HP)
Structured similarly to PCP deals, with a Hire Purchase deal, you will pay a deposit and make regular payments – at the end of the term agreed the car is yours.
Benefits of HP
- Spreading the cost of car ownership over a longer period.
- No large payment looming as with PCP deals.
Drawbacks of HP
- If the car depreciates in value faster than expected, you will be left out of pocket when the car becomes yours.
Personal loan
If a dealerships finance package doesn’t suit you, a personal loan from a bank could cover your costs while still giving you the opportunity to pay the amount back over an extended period of time.
Benefits of personal loan
- Interest rates are typically lower for personal loans compared to car finance provided by dealerships.
Drawbacks of personal loan
- Repayment terms are much less flexible and can be longer than many car-specific products.
- Having finance in place before you find a car can impact your negotiating position with dealerships
