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New car purchase – which is the best way?
Although the best way to purchase a new car is usually with cash, most people need to borrow at least part of the purchase price. There are three main ways to finance your car purchase. Each has positives and negatives, so it’s worth giving them each careful consideration before proceeding.
Hire purchase finance is effectively a loan which is secured on your vehicle, and which is paid back in monthly instalments over a set number of years. However you need to examine showroom deals very carefully as car dealers are often keen to sign customers up to hire-purchase agreements as they often receive hefty commission payments for every finance customer.
Personal Contract Purchase (PCP) plans, on offer from most car dealers, are worth considering. You put down a deposit, make monthly payments and at the end of the plan you can pay the final balance to keep the car, or hand it back and switch to a new plan on another new vehicle. This means you can change car every three years or so, but check the small print carefully. Some agreements limit mileage, stipulate service frequency and tie you to a particular insurance package.
Personal loans tend to provide the cheapest method of financing the purchase of a new car. Increased competition in recent years has seen interest rates fall and the advantage of using a personal loan to buy a car is that it is unsecured, so you don’t have to pay off your loan if you decide to sell your car early.
February 4, 2009 at 8:29 pm | Car Loans, personal loan | No comment
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