If you’re in the market for a new car then you’ve probably started reviewing your finance options. A car is usually a big purchase, so it’s common to have to borrow money to cover the costs. Here are some of the different ways you could finance your next car, and a quick look at how each option might meet your needs.
Cash is king
Do you have enough spare cash in your bank account to pay for your car? If you’re in that fortunate position then you may be considering buying your car without finance. This could save you money on interest, but remember to review any other spending priorities before you commit your funds.
The most common blocker to buying a car with cash is the need to fund a house or mortgage. If your home is your priority you may be reluctant to sink all of your savings into a new vehicle. If this is the case, remember you could balance your finances and put some cash into your car as a deposit then finance the rest with the right funding option.
The convenience of a credit card
Credit cards are often seen as a very ‘easy to access’ way to finance a car. Credit card finance can appear attractive if you are offered low interest rates and low or minimal annual fees. But a car purchase is usually paid off in the longer term, so it’s important to make sure that interest rates and fees don’t rise and start costing you more.
Credit cards also require discipline when it comes to paying off your debt and getting rid of your obligation. It’s very easy to miss a payment or reduce a payment if you have something you’d rather spend your money on. You may also find yourself adding day-to-day purchases onto your credit card if you’re short of cash.
Without discipline, using a credit card to finance your car could end up costing more in the longer term. If you’re uncertain about your ability to repay your finance, your car may be better funded with a loan.
Finance with a car loan
Car loans have been specially designed to deliver the benefits that you need when getting finance for a car. You can manage your repayment levels to meet your budget. At the same time you can rely on repayments being regular, interest rates being fixed, and a set end date to your finance when your car is fully paid off.
Looking for flexibility in your finance? Most car loan providers will allow you to add in the option to make lump sum payments if that suits your budget. The main benefit is that a car loan can be structured to work with your income expectations for the longer term. Allowing you to repay your finance on your terms.
Depending on your situation, there are a number of different ways you could finance your next car purchase. Whatever option you choose, it’s important to be realistic about your budget and your ability to stick to a repayment plan. The right finance should not just fund your car; it should support your plans for when you want to pay it off and fit in with your day to day budget and lifestyle.