From saving up, to taking out a personal loan or leasing, there are a lot of different ways you can go about financing a car. The best option for you will depend on your own personal financial situation, your plan moving forward and also the type of car you’re interested in buying.
A personal loan enables you to purchase the car and then make repayments over a set loan term. You’ll own the car from the start and once you’re finished making repayments there’s nothing else you need to do. The interest rate you’re offered will depend on the loan provider, your credit history and also the type of loan you choose. Use a loan calculator to get an estimate of what your repayments would be based upon the amount you want to borrow and how long you’d like to borrow for.
With a hire purchase you pay a deposit initially (similar to a mortgage) and then pay off the balance and interest over the course of the loan. Once you’re finished making repayments you own the car, but up until that point the car is owned by the finance company and they can choose to repossess it if you miss any repayments.
Personal contract finance
Similar to a hire purchase, you'll pay a deposit followed by monthly payments for a fixed period. After this you have a few options:
- Give the car back
- Buy the car with a lump sum
- Start another personal contract with a different car
This is similar to renting a car as you don't get to keep it at the end of the contract. You'll usually have to pay some rental costs in advance and then regular monthly payments. These may be higher, but you may get non-fuel running costs such as road tax or servicing included.
As you’re thinking about what financing option will best suit you, make sure you consider ongoing costs such as insurance, servicing and fuel. These can make a big difference to your budget and may impact how much you want to borrow and how you would like to borrow it.
If you’re interested in taking out a personal loan, take a look at the different types of loans available to see what your options are.