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The ultimate dream for any driver has to be being able to go into a showroom and buy a brand new car of their choice. Just the distinct smell of the interior of a new car can be intoxicating to many drivers. This is a dream scenario for many of us, but making that dream come true is not as hard as you may think.
There are many dealerships that can offer some really affordable finance deals for would be buyers. You do however have to do your homework, so we thought we would provide a guide to the finance deals that are available to you.
The first step is to decide on which is the best finance option for yourself, as you can choose from either a loan, lease, hire purchase, or dealer finance.
One of the most popular ways to purchase a new car is by taking out a personal loan from a bank, building society, or other lender. If you plan on doing this, you need to find out which bank or lender can give you the best option that will suite your financial situation. There are a number of comparison web sites that can help you find the best deals.
APR is the easiest way to compare loans and to find out how much the loan will cost you in total. You need to check the APR carefully as it can vary depending on your credit rating. One thing to bear in mind is that the longer period you have the loan for , the more you will pay back to the lender. Keeping your loan period as short as possible is the ideal way to go, but never under any circumstance overstretch your financial commitment. Have a set figure that you can afford to pay each month and do not go above your limit.
The main problem with taking out a personal loan is that any of your assets could be seized if you default on your payments. Taking out a dealer finance scheme means only the car can be seized.
After a bank loan, hire purchase(HP) is the easiest way to finance a new car purchase. HP agreements usually require a 10% deposit, and fixed monthly payments. The car becomes the property of the HP company until you make the final payment on it. Even though you are driving the car legally you do not have any legal rights to sell the car, until the HP agreement is paid in full.
Similar to dealer finance the HP agreement is secured against the car, which means only the car can be seized if you do not keep making the payments.
When taking out a HP agreement make sure, as far as possible, that your monthly disposable income is not likely to decrease. Also you need to make sure that you are aware of any early settlement fees.
Personal Contract Purchase
Personal Contract Purchase (PCP) is very similar to HP, there is a deposit to pay, a fixed rate of interest, and set monthly repayments. The difference between PCP and HP is that once you have made the final payment you will have 3 choices
- Return the car to the supplier
- Keep the car
- Trade the car in against a replacement.
Personal Contract Hire (PCH)
This is also known as personal leasing, and basically you are hiring the car for a given period, usually 2 or 3 years. There is in most cases a mileage limit set for each year, and this is usually about 10,000.
There is no option for you to purchase the car at the end of the hire period, and you are responsible for the day to day upkeep of the vehicle.
The good side of opting for (PCH) is that the deposit, and the fixed monthly repayments are lower, and in most cases you can add a vehicle maintenance agreement into the (PCH)
One of the most important things you need to do if opting for dealer finance is, research. If you do not do your homework you can lose any benefits you get from haggling and trading in your old car, by getting a poor dealer finance agreement.
Some of things you will want to check are not only current, but upcoming, manufactures finance deals. These can include things like, interest-free, or lower APR rates, or even deposit contributions.
Don’t go for lower monthly repayments if you can afford to. What you need to concentrate on is how much in total you will pay, and then compare those against other finance options. Just walking into a dealership with the this basic knowledge can in some cases get you a much better deal. Everything is negotiable!
As with other options, only the car is at risk of being seized if repayments are not met.