Car Finance - what are the options

TM MoneySupermarket com We provide exclusive content to help people make the right decision. Ways to finance your car purchase You may have managed to get a great car at a fantastic price, but you can undo all that good work if you choose the wrong method of payment for your new wheels. Before you head to the dealership, it's a good idea to research your options carefully. Take a look below to see which payments methods are the most practical and savvy. Not all dealerships will accept a credit card payment, but with some cards offering interest free introductory offers on purchases for as long as 16 months, using a card is becoming an increasingly popular method of payment. Using a credit card also offers protection from the Consumer Credit Act 1974 and the Consumer Credit Directive. With this in mind, even if you have the cash available, you may want to consider making the purchase with your credit card and then paying off the balance in full the following month. Savings Unsecured loan Pros: · You won't pay any interest payments. · You own the car completely and immediately. · Dealer may give you a small discount for cash. Pros: · Interest rates at lowest ever levels. Unsecured loans do not put any assets at risk of repossession. Car dealers may offer great loan rates themselves. Cons: Might take some time to save up to buy a car. Cons: Good credit rating often required for an unsecured loan. Interest payments will add to the overall cost of your car. It would take 4 years and 7 months to save up for a new Golf S (costing £14,425) if you put away £250 each month in a tax-free savings account paying an If you paid for the new Golf S with an unsecured loạn with an APR of 5.5% over 4 years, then you would pay a total of £16,102.78. annual interest rate of 2.00%. Credit card Secured loan 1234 5678 90. 1234 5678 9 Pros: Pros: Protection from the Consumer Credit Act and the Can borrow relatively large amounts. Can be obtained without a perfect credit score. Consumer Credit Directive, even if you've used your card to only pay a deposit. · Interest free offers allow you to spread your payments over a number of months. Cons: Cons: · After the 0% period ends, the interest rate will jump - the average APR for credit cards is 17.32%. · Your credit limit may not be high enough to meet Need equity in a property. · Rates often higher than unsecured loans. · Risk losing your home. the cost of the car. · It is not recommended to pay the car entirely on a credit card, just the deposit. If you paid for a new Golf S with a credit card that had an 16-month interest free period, that increased to 15% APR thereafter, it would cost a total of £16,943, if If you paid for the new Golf S with a secured loan with an APR of 8.5% over 4 years, then you would pay a total of £17.066.49. you repayments were £300 a month. Lease A lease is a long-term rental agreement where you pay a monthly fee to use a car for an agreed period and number of miles. There are 2 main options when it comes to leasing: 1. Personal Contract Hire (PCH) 2. Personal Contract Purchase (PCP). Personal contract hire Personal contract purchase Enables you to drive a new car every few years but you do not have to commit to buying the car at the end of the arrangement. This type of leasing gives you the opportunity to buy the vehicle at the end of the agreement. You pay a deposit, monthly repayments and then a final "balloon payment" that is based upon the car's value at the end of the lease (the minimum guaranteed future value). You can also hand the car back to the You pay a deposit (usually 2-3 months' worth of repayments), followed by monthly instalments based on the expected depreciation of the car's value. leasing company if you decide not to keep it or part-exchange it for a new model. PENTAL PURCHASE RENT ME Pros: · You don't need to worry about depreciation due to the guaranteed future value of the car. You can drive a new car with a small up front Pros: · VAT registered vehicles leased in this manner can claim some tax back. · Easy to budget with fixed monthly costs. · You don't need to worry about depreciation. payment. · Less commitment - sign a contract typically over 2-4 years. Cons: · Can never actually own the car. · Penalty for exceeding mileage limit. · You don't own the car. · Fee for getting out of the contract early. Cons: · You could be subject to a penalty if you decide to end the lease agreement early. You will not own the car until final "balloon payment" is paid · Balloon payment can still be relatively expensive. With a deposit of £1,000, monthly repayments of £295 over 3 years, and a final balloon payment of £4,500, it would cost in total around £16,120 to pay for a new Golf S if the APR was 6%. You cannot actually purchase or own the car you drive with a Personal Contract Hire. Hire purchase With hire purchase you usually pay a deposit of around 10% of the car's value, and then pay instalments (including interest) over a set number of months. They are normally arranged by the car dealer and the loan is secured against your car, so you won't own it until the last payment is made. Pros: · No mileage restrictions. · Quick and easy to arrange. · Less commitment - sign a contract typically over 2-4 years. PAYMENT PLAN £ 2 3466 89 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cons: · You don't own the car until the final payment. · If you fall behind with payments, you may lose the car. · You are liable for damage. · Look out for extra fees. S22 2924 28 29 30 31 el27 2820 lan With a deposit of £1,000, and with monthly repayments of £279 over 3 years, it would cost approximately £15,807 to pay for a new Golf S if the APR was 5.1% The final cost includes a £60 option-to-purchase fee, a £125 acceptance fee and a final payment of £3,200. The car finance industry had a great year in 2012 £837million Finance sold in dealerships is now used by 70.2% of all consumers who buy a new car. The value of cars bought on finance by consumers through dealerships in October 2012. +26% +17% +13% -4% -4% Car finance Store credit Second mortgages Credit cards Loans Over the three months to November 2012, the value of car finance was up 26% year-on-year to £5bn, 9% more than any other sector. +21% +14% +14% +14% -12% Car finance Credit cards Loans Store credit Second mortgages Store cards In the 12 months to November, car finance totalled £16.47bn, a year-on-year rise of 21%. DISCLAIMER: It is important to check all interest rates and promotional offers yourself before taking out any form of credit. The examples in the infographic may not represent typical interest rates on offer at the time of reading. Sources: www.motorfinanceonline.com/news/car-finance-growth-beats-other-consumer-lending | www.financeacar.co.uk/car-finance-options/personal-contract-purchase | www.fla.org.uk/media/MotorFinanaceStatsOct2012 www.volkswagen.co.uk/buying-guide/finance-hire-purchase www.contracthireandleasing.com/guides/personal-car-leasing| www.motortradenews.com/statistics/news/automotive-news/30690-new-car-finance-rose-by-30-in-2012-according-to-fla-figures.html | 1234 5678