How To Finance Your New Car

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Whether you are buying your first car, or just looking for a change, coming up with the finances for a new car can be a challenge. There are many different voices and options available to you, but how do you know who to listen to, or which option is going to provide the best value? In this article, Sandyford Motor Centre guides us through the car finance options available.

Make sure to research and inform yourself before making a decision and tying yourself into a contract.

1. Hire Purchase

Hire Purchase is a form of car finance where you pay for the vehicle over a number of years – between 1 and 5 years specifically. It begins with a deposit, then incremental payments are made monthly over the remaining period of the deal. Once all payments are made, you are the official owner of the car. The fixed monthly repayments over a flexible time period is what appeals to most drivers, along with the prospect of eventual ownership.

2. Personal Contract Plan

Personal Contract Plan or PCP, is a form of Hire Purchase that has proved popular in Ireland in recent years. The main advantage is the flexibility a PCP offers. It allows you to change your car regularly, rather than a long term contract like Hire Purchase. It can be broken down to 3 areas:

1. Deposit: Firstly, you pay your deposit on the car, which is usually 10-30% of the vehicle’s worth. Often people will generate these funds through the trade in value of their current car.
2. Guaranteed Minimum Future Value (GMFV): Guaranteeing what the car will be worth at the end of the repayments, no matter what the depreciation is, is a key benefit of PCPs.
3. Monthly Repayments: The monthly repayments on the vehicle are calculated on the difference between the deposit and the GMFV.

3. Personal Loan

Some people opt to take out a personal loan to fund the purchase of a new car. Many people like the thought of keeping the loan and the car purchase separate, so if anything goes wrong they can sell the car and get the cash back. This is the go-to option for those who do not have any savings or a car to trade in. Loans can be taken out from your bank, or from the Credit Union in Ireland if you are a member.

It is important to consider the factor of interest when using a personal loan to buy a new car. General interest rates vary between providers, but over the course of a few years, you will be paying significantly higher than if you choose Hire Purchase or PCP. Personal Loans also bring your credit rating into the equation, which the other options do not.

4. Leasing

Leasing is very similar to Hire Purchase, but with one key difference – you do not own the car at the end of the payments. It is essentially just a long term car rental. People may go for this in more short term situations, when they have no interest in eventually owning the car. The deposit is significantly smaller than with other finance options, and the pre-agreed fixed time and fee make for appealing factors, as well as not having to worry about depreciation.

Using your savings is another way of purchasing a car. You could also look into the pros and cons of Contract Hire and Business Hire Purchase.

So which car finance option should you choose?

The options laid out above are the most simple ways to car finance, particularly if you are a first time buyer. If you wish to speak to an expert, call Sandyford Motor Centre Car Dealership in South Dublin, who would be happy to talk you through your finance options.