Different ways of paying for your new car
With the new '59' plate vehicles available from September there is expected to be the usual increase in demand for new cars. If you are one of the lucky people able to afford to buy a new car, you may still need to consider the various ways to pay. There are a few different ways of paying for a new car and all have their benefits, but which one suits your requirements?
Personal Contract Purchase
This is one of the most popular choices for many buyers. A Personal Contract Purchase (PCP) is when the buyer pays off a percentage of the car price over a fixed period of time which is normally around 3 to 4 years. After this period, you can either pay the outstanding amount left on the car or use the car to trade up to newer model.
The downside to PCP is the price of the car is fixed so you will not be able to haggle with the salesperson. However, many people choose this option because a deposit is not always required.
Hire Purchase
Hire Purchase (HP) is another popular option amongst new car buyers. Using HP normally involves the buyer putting a small deposit down (but this is not always necessary). There is then a contract drawn up between the car company and the buyer which states that a set amount has to be paid each month.
After half the value of the car has been repaid, both parties will assess how to proceed. Either the buyer carries on paying the monthly instalments or they hand the car back to the company and walk away. In effect you are renting the car and so may be liable for any damage caused etc depending on the agreement terms.
HP and PCP are popular because they often have lower monthly repayments than loans. Loans can still be difficult to secure given the economic climate so HP and PCP are often the route which people go down to acquire their new car.
Credit checks will be made on drivers opting for HP which will affect the monthly repayments you have to make. There are a few other options that may be viable for certain customers that have sufficient credit history or available funds such as paying on your credit card or taking out a personal loan.
Consider your options if you're looking to buy a new car and take a few hours to do some research online as you may find the perfect option for you. Doing some research at home could save you time and money.
