Purchasing a car is the second most expensive thing after buying a home; so understanding the best deals on finance are essential.
Nowadays there are so many options from buying outright to buying a car on finance.
It’s normal to have hundreds of questions running though your mind before actually purchasing a car; should I really be using all my savings? What if there is an emergency? Do I really want to be paying monthly for my car when I have so many other direct debits? Which finance option is best suited for me?
There are two main financing options available:
Option 1: Hire Purchase is a form of buying a car on finance and is paid in installments; payments are spread over 12-60 months. They are super quick and easy to set up with little or no deposit and even have flexible repayment terms.
Options 2: Personal Contract Plan has a slight variation on hire purchase and tends to result in lower monthly payments, instead of buying the car outright; you agree to pay the difference between its sale price and its price for resale back to the dealer.
At the end of the term you have three options:
1) Hand back the car to the dealer and pay nothing
2) Trade the car in and start all over again
3) Pay the resale price of the car and keep it.
This is usually based on a forecast of annual mileage over the term of the agreement. This is a great option if you want lower monthly repayments and want to change your car frequently.
Of course you can always just pay cash and take up the finance option.