Is your current car reaching the end of its ‘optimal’ life span? Do you want an upgrade? Is it time for a new company car? It could be any one of these reasons that is driving you to start shopping for a new car. With the March 2011 plates coming there are also likely to be some good deals available.
Whilst a large proportion of the public buy their vehicles through a dealership and shop around based on the ‘price of the metal’, approximately 80 percent of car buyers in the UK actually use car finance to fund their new car and what is relevant for them is the cheapest monthly price of the car and total payment across the finance period.
Many people believe that buying a car in full is the best option, however, the truth is that if you take the time to assess your needs fully and then investigate your car finance options properly, there’s a very good chance that you could pcp car finance get a more flexible, suitable deal for your circumstances. In fact, in some cases (e.g.; you buy a new car every 3 years and then have to part exchange or sell your old car) it may even be better than buying a car with cash.
At is most simple, car finance is most often used to refer to three different options – car leasing, hire purchase or unsecured car loans.
Of the three different options that are available, the most popular form of finance sold to car buyers by dealers is leasing. In the first half of 2010 approximately more than 50% of all people using car finance deals decided to lease a car using the product personal contract purchase (PCP). The attractive factors for PCP were its flexibility to change the car regularly (between 3 – 4 years) and, whilst they don’t actually own the car they don’t have to worry about depreciation and leasing brings with it monthly payments that are very often as much as 40 – 50% cheaper than if you were to buy the car using a loan over the same term. If they do want to own the car, then they have the option to buy it at the end of the agreement.
To the surprise of many people, car loans from a bank are actually the least popular finance options. Hire purchase agreements are the middle ground between the two sandwiched in the middle, giving buyers the ability to spread the cost of the whole purchase price of the car over a set period of time. However, with hire purchase a car buyer is committed to paying a small final purchase price at the end of the finance term should he/she wish to keep the car. However, like PCP you do not own the car until you have made that final payment.