Paying For Your Car

You’ve done your research. You’ve decided what type of car you want, new or used. You’ve decided on the main details like model, make, colour, features and fuel type (diesel, petrol or electric/hybrid) so now all that is left to do is deciding how you are going to pay for your car. There are several options when it comes to paying for the car including personal loan, Personal Contract Plan (PCP), Hire Purchase (HP), and cash/savings. The suitability of each car financing option differs case by case so making the choice is entirely up to you.

We’ve spoken to our highly experienced finance managers from across Spirit Motor Group to give us their top three car financing tips that we hope will help make your decision that little bit easier.

#1 – Know your limits.

Before you start the process of choosing your new or used car you should work out how much you can budget to spend. This will help make it easier to decide how you are going to cover the cost of purchasing your car. Look at all in-comings and outgoings to see what might be possible. Remember to think long term. You might be able to afford x today, but will that be the case in one to two years’ time?

#2 – Do your research:

As mentioned already, there are several options out there for you to choose from in terms of car financing. If you are not overly familiar with each option, it might be a minefield to negotiate but each have their benefits. Some of these options are offered by the car dealership directly whilst others are independent. These options include:

Independent Financing

• Personal loan - This involves you borrowing the money from a bank, credit union or other lender and paying for the car outright. Make sure to confirm the APR of the loan and to set the repayment schedule to one that suits you. You will own the car from the offset.

• Cash/ Savings – This involves you financing the purchase of your car using your own savings. You might have a nest egg already or are currently saving. As with all finance options you should make sure to decide how much you can set aside and for how long you can save. Once you’ve saved up you can start shopping around for the make/ model that you want. You will own the car from the offset.

Dealer financing

• Hire Purchase (HP) - This is available on new and used cars through the dealership meaning unlike personal loans you can arrange finance and collect the vehicle all from the one place. HP is a popular choice with many car owners as it is straightforward to apply for and can be structured to suit your budget. Typically, you pay an initial deposit then the remainder of the balance is repaid in installments over the agreed loan repayment period. Make sure to confirm all fees and charges with the dealer before signing your contract. You will not own the vehicle until the final payment.

• Personal Contract Plan (PCP) – This option is very similar to a hire purchase agreement. PCP differs from HP in that you pay less of the amount owed on a vehicle during the agreed period of the contract. However, at the end of the agreement you will owe a final lump sum called a Guaranteed Minimum Future Value (GMFV) if you decide to keep the car. This GMFV forms part of the three pillars of PCP agreement. The other two are the deposit, typically between 10% - 30% of the vehicle value, and low monthly repayments. PCP agreements usually last between three to five years and the vehicle must be returned in good condition if you do not decide to keep it. You will not own the vehicle until the final GMFV payment.

#3 Think it through:

Deciding how you are going to pay for a new or used car is a big decision. One which will have an impact on your finances for several years due to potential repayments. Thinking long term about everything to ensure that you fully comprehend the terms and conditions before you finalise any contracts is important.

Thinking of changing your car? Speak to our Spirit Motor Group team today about our new or used options. Get ahead of the conversation by working out your potential finance repayments on a used vehicle by using our flexible finance calculator to find the perfect vehicle to match your budget.