Purchasing a car is no easy decision. At times, it can also be intimidating. With the prices going up each year, getting a new car can be one of the most expensive purchase you’ll make – that is, if you’re not paying for a house. It becomes even more challenging for most people since they have to consider other things as well such as the running costs. Owning your own set of wheels is definitely an interesting prospect and a necessity if you live on a big city.
How to Purchase a Car
However, as exciting as it is, you still need to make practical decisions concerning that matter if you don’t want to end up struggling to make ends meet. With that said, the decision to buy a car starts with considering on how to pay for it.
1. Personal Savings
There are a lot of advantages on paying for your car purchase in cash. However, if you go with this method, you need to make sure that you have enough cash left after making your purchase.
- It’s a cheaper option since you won’t have to pay for monthly interests.
- Paying with cash means that you can use your car freely as you want as soon as you take it out of the dealership.
- You’d have lesser debts.
- A large amount of money will be taken out of your savings.
- Your vehicle choice may be limited with the cash you have on hand.
- Saving up for a new car can take a long time.
2. Car Loan
Getting a loan from a bank or any finance provider can also be the next cheapest thing to get when you don’t have enough money on hand for a new car. But remember that you can only take out a personal loan if you have a good credit standing.
- Can easily be arranged online or through phone call.
- Could improve credit history thereby increasing your chance of being approved for another loan in the future.
- You get to keep your cash savings in the bank.
- Can be more expensive than paying cash since you have to pay for the monthly interest.
- There is a chance that your car may be repossessed by the bank if you fail to pay your dues.
- Default loans can affect your financial credibility.
3. Personal Contract Purchases (PCP)
Personal Contract Purchases or PCP is financing method that allows the person to borrow money from a credit company in order to buy a car. Usually, a deposit is made and payments are made every month for a given period of time.
- You have the freedom to choose any care you want to buy.
- The higher your deposit, the lesser your monthly payments.
- Payment period is usually flexible.
- You won’t officially own the car unless you’ve paid the full amount of the money you borrowed plus the interest.
- A full and comprehensive insurance may be needed.
- You need to make sure that you won’t exceed the suggested mileage so avoid extra charges.
4. Credit Card
Although it’s not a common method, using a credit card for your buying a car could also be possible. In fact, research has shown that about 1 in 20 car buyers swipe their credit cards to complete the purchase.
- Depending on the bank, credit cards usually have reward points you can take advantage of when you make large purchases.
- Some cars are have zero-interest rates.
- You would have extra protection since large sums of credits are usually protected by Consumer Credit Act of 1974.
- Not all car dealerships accept credit cards.
- Dealers usually charge a handling fee.
- Credit cards come with a credit limit.
5. Rent to Own
This type of car buying method has been on the rise today. It’s a great way to own a car especially when you can’t get a loan from a bank. If you’re not familiar with how it works, there are a lot of companies that are willing to enlighten you on how to rent to own a car.
- Having a bad credit history won’t matter.
- No interest rates.
- Late payments are fine but comes with additional fees to pay.
- You’ll pay a significantly larger amount than what it’s actually worth.
- Your car will not be eligible for warranties.
When deciding on the best method of vehicle finance, it’s important to make sure that you’d be able to afford it. Or else you would end up carless with a bad credit history. Though paying with cash is the best choice to make, there’s also nothing wrong with going with the other options as long as you can meet the payments.