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Finance tips for those purchasing a car

Except if you buy a house, you might never spend more money in one go than you do when purchasing a car. So, it’s important that you get every decision about it right – including not only the most suitable car model, but also how you will finance and afford it.

Here, then, are some of the things to do or bear in mind when buying a vehicle. 

Account for both upfront and ongoing costs 

The headline price of a vehicle or even the repayments on a car finance deal aren’t the only things car buyers need to consider from a finance point of view. 

That’s because the exact cost of the road tax, insurance, fuel, MOTs and servicing – among other things – will all affecthow affordable a particular model is in the long run. 

Learn the basics of haggling 

Some of us are understandably intimidated by the thought of haggling, but there’s an art to driving a hard bargain, and dealers practically expect you to do it. 

Of course, if you’re buying a car online, there won’t be much scope for haggling. However, that doesn’t mean that there aren’t tricks and services out there to help you get the very best car for the best price (you can click here to see one such example), so it definitely is worth doing some research to see what you might be able to take advantage of. But, if you know that you’ll be face-to-face with a dealer, even some very simple haggling – such as getting them to throw in something free like floor mats or a sat nav, or asking for a bit more money off an already-discounted vehicle – can go a long way. 

Consider using at least some of your savings 

The most affordable way to fund a car purchase is to buy it either partly or fully with cash. Drawing upon your savings will enable you to avoid paying interest on any loan or other financial agreement. 

Even if you don’t have enough savings to pay for the whole car, you could always use it instead to put down a larger deposit on a car finance deal, which will lower the monthly repayment amount. 

In any case, you probably shouldn’t use all of your savings to pay for a car, just in case of any emergencies. 

Ask yourself what kind of car finance deal might suit you 

If you do need to borrow some or all of the money to buy a car, a car finance deal isn’t necessarily your only option. You could, for example, approach your bank or building society for a personal loan. However, this comes with the downside that if it is secured against your home, any failure to keep up with your repayments could put your home at risk. 

Another option is to apply for car finance through a reputable broker such as CarFinanceGenie. But if you do, you’ll likely need to choose between a hire purchase (HP) and personal contract purchase (PCP) deal. 

HP and PCP deals are similar in that they both involve fixed monthly payments and are secured against an asset, such as the car you’re buying. 

The big difference is that as soon as you complete the monthly payments on a hire purchase loan, you will own the car outright. This won’t be the case with a PCP deal – instead, you’ll need to pay a lump sum, known as a ‘balloon payment’, to finally acquire the vehicle. 

But on the other hand, a PCP agreement gives you the option at the end of the loan term to exchange or return the car, which is not possible with a HP deal. 

There’s no single ‘right’ or ‘wrong’ way to finance a car purchase – so much depends on your specific desires, circumstances, and needs. Take into account all of the above aspects, then, and it will be easier for you to make the right financing decisions. You can find more information on invoice pricing, which can help reduce stress when buying a new vehicle. This is a car-buying service that works in multiple ways, such as brokers, or car concierges. The idea is that you’ll know the price of your car without needing to negotiate before you get as far as the dealership.