The main benefits of car finance are well known; affordable monthly repayments, minimal deposits, flexible agreements, poor-credit applicants accepted and so on. But what about the pros and cons of the alternative options available?
If you are still undecided on how to finance your new car, here is a brief overview of the benefits and drawbacks of other car finance options available:
Using Your Savings to Pay in Cash
Paying for a car in cash is by far the quickest, easiest, most cost-effective option. That is, unless it dangerously depletes your savings and leaves you with no financial safety net.
Buying a car in cash means eliminating all interest fees and borrowing costs from the equation. It also means you take ownership of the car immediately at the point of purchase. Therefore, if you have got enough cash to buy your car, you should.
Buying a Car Using a Personal Loan
This is a popular option, which in line with today’s super-low interest rates can be quite attractive. The downside with personal loans for car purchase is that unless you have an excellent credit score, you are likely to be declined.
Personal loans are relatively quick and easy to arrange, though eligibility checks can be quite strict. Your employment status, proof of income and credit history will be scrutinized in order for you to qualify.
Using a Credit Card to Pay for a Car
Simply putting the entire balance of a vehicle purchase on a credit card isn’t quite as crazy as it sounds. For example, you may have a credit card with an introductory offer of 0% APR for the first year or so, meaning you could repay the cost of your car during this time with no interest whatsoever.
The downside with credit cards is that, outside these limited-time introductory windows, interest rates tend to be quite elevated. In addition, maxing out your credit card with a vehicle purchase may cause creditors to question your financial decision-making when making future loan applications.
Leasing Instead of Buying
With servicing and maintenance included in the deal, it can be more affordable to run a leased car than a car you actually own. Monthly repayments can be comparatively low, for a vehicle you wouldn’t normally be able to afford.
The obvious downside of leasing is that you never actually own a stake in the car. When the lease term comes to an end, you simply hand the car back but you will have nothing to show for the money you have paid.
For more information or to discuss any aspect of car finance in more detail, contact a member of the team at UK Car Finance for an obligation-free consultation.