Are you getting ready to buy your next car? Or, maybe you’ve passed your test and are gearing up to get your first every car! Regardless, you have to be aware of the different ways of buying a car. Sometimes, it’s as simple as handing over some cash and driving away. Other times, there are various finance options that offer alternative methods of payment.
Some of these methods may suit you better than others. To help you make the right decision, here are the different ways of paying for your car.
Payment in full
There’s no need to spend much time on this one – it’s self-explanatory. Pay the full price all in one go, then walk away with the keys in your hand.
Hire Purchase (HP)
Hire purchase is one of the most popular car finance options out there. It’s usually chosen when buying a brand-new car as they tend to be too expensive for the average person to pay for all in one go. However, as you can see on the Hogg Motor Co. website, you can select this finance option for used vehicles as well. The idea is that you make a small deposit and make repayments over a flexible term – this can be anywhere between 12-60 months. Effectively, you’re ‘hiring’ the car until the entire cost is paid. Then, you own it, but you will have to pay interest on top of the monthly payments. Usually, the rates are fixed, so you can always figure out how much you need to pay every month.
Personal Contract Purchase (PCP)
Similar to an HP, but with a twist. A PCP lets you pay a deposit and then make smaller monthly repayments over a much shorter period. Then, when the time is up, you either trade the car in and start all over again, you hand it back to the dealer and do nothing, or you make one final payment to own the car. A lot of used car dealers offer this option for people who aren’t sure if they want to keep the car but would like to leave the window open. It usually ends up being more expensive than HP if you do end up buying the car, so bear that in mind.
Leasing is essentially where you rent the car for an extended period. You can make monthly payments for up to 36 months, but the car is never yours. When the term is up, you can take out a new lease on another vehicle, so it’s a good option if you want to drive lots of different cars.
In summary, these options all offer something slightly different. If you can afford the full payment without suffering any financial issues, then it is the best option for most. If not, then consider which finance option suits you best. If you just need help spreading the costs, then hire purchase is probably ideal. If you want more options at the end of the contract, then a PCP may suit you best. Or, if you just want to drive as many cool cars as possible in your life, then leasing could be up your street.
Photographs courtesy of motorverso.com