When it’s time to buy a car there’s not just one option available to us.  In fact, we are going to look at six different car buying options that we can choose from within this article.  There are even more, but these are some of the most popular and best ways to buy a car.

So if you don’t know what a lease is from hire purchase, or whether you’d prefer to shop used from a private seller or a dealership, don’t worry.  We’ll cover these options and more within this article.

Car buying options: which is right for you?

The car buying process is not always easy. There are many options to choose from and it can be hard to find the right one for you. This article will give you six options on how to purchase a car and help you decide which one is the best for you.

1. Buying a vehicle with a personal car loan

For many people, buying a new car is a big financial commitment and one that cannot often be made upfront.  Cars are expensive and unless people have savings specifically for this purpose, it may be that a new vehicle purchase will need to be spread out over time.  This can be done by using a loan to buy a car.  

The loan is paid in instalments over a certain period of time. The borrower pays interest on the money that they borrow, and the lender charges interest for providing the money. To get an individual loan with good interest rates, you will need to have good credit and be able to provide proof of income and assets. You will need to think about how much you can afford to pay each month and what your credit rating is like. Before you start looking at car loan deals, it's worth checking your own credit report and score as this will affect what deals you are offered.  You’ll also need to know your maximum budget when it comes to monthly loan repayments.  

Is getting a car loan the right decision?  The benefits of getting a car loan when buying a car are that you can get into a new or used vehicle without having to come up with all the cash at once by yourself as you’ll be borrowing the money instead. You can also choose from various types of loans with different rates and terms that best suit your needs and budget.  Some countries are even offering special green loans to buy electric cars with lower interest rates than regular auto loans.  However, a loan is a financial commitment and you may not be able to afford the loan repayments if your financial situation changes.  It might be better to choose a loan over a longer term to keep the payments low in case of a change in your finances, but choose to overpay the loan to reduce the term or payment amounts.  Check the details of the loan to ensure this is an option before making a decision. 

Personal car loan advantages:

• Allows you to purchase a car without having to come up with all the cash upfront.
• You can choose from various types of loans with different rates and terms that best suit your needs and budget.
• Some countries offer special green loans to buy electric cars with lower interest rates than regular auto loans.

Personal car loan disadvantages:

• A loan is a financial commitment and you may not be able to afford the loan repayments if your financial situation changes.
• You may end up paying more in interest over time than the original cost of the car.

2. What does ‘hire purchase’ mean when buying a car?

When it comes to borrowing money to buy a car, a loan from a bank or other loan provider will give you the cash up front to buy the car.  However, there is another option to spread the cost of a car called ‘hire purchase’.  A car can be bought on finance in this manner by getting an agreement with a car dealer who offers this service.

Buying a car using the hire purchase method means you’ll pay a deposit and then make monthly instalments (with interest) to the car dealer or finance provider.  The car is secured against the finance, so if you fail to make the payments you will lose the car.  It’s also different to getting a personal loan as you will usually need to make a down payment.  There might also be one final lump sum payment at the end of the agreement, after the monthly instalments.  The car will then be yours to keep once the agreed amounts are all paid in full.  

With hire purchase, the car is not yours until you have paid in full.  You are essentially hiring the car until this point.  However, at the end of the agreement once all payments are settled, car ownership will be transferred to you so the car is legally yours.

Again, as you will be making monthly payments, you will need to look at your personal budget and affordability.  To aid you in this process, make use of specialised calculators at https://www.carpaymentcalculator.net/ to work out exactly how much you can afford to borrow, or what your car loan repayments will be with interest.  

Hire purchase advantages:

• You can purchase a car without having to come up with all the cash upfront.
• The car is secured against the finance, so if you fail to make the payments you will lose the car.
• The car will be yours to keep once the agreed amounts are all paid in full.

Hire purchase disadvantages:

• Monthly payments can be costly, and you'll need to look at your personal budget and affordability.
• You'll usually need to make a down payment.
• There might be one final lump sum payment at the end of the agreement, after the monthly instalments.

 

3. What is leasing a car?

When you lease a car, you never have the option to own the car.  You are simply paying a monthly fee to hire the car and you are never the owner.  It’s a great way to be able to drive cars you wouldn’t otherwise afford to buy.  It also means you can drive a new car every two or three years once the leasehold is up.  You usually agree to a set number of months or years you lease the car for and have to commit to this time period.  Some companies provide monthly car rental options with flexible 28-day rolling contracts that allow cancellation without penalties.

Some of the benefits include that leasing is cheaper than buying a new car upfront, you don’t always need an initial down payment as there are zero-deposit lease cars available, you might be able to trade in your leased car for another one when you need to (depending on the terms of the contract) and you don’t always need perfect credit to get approved for leasing.

The downsides are that monthly payments can be costly and you won’t own anything at the end of the lease period, so it can sometimes feel like a waste of money!  To make it worthwhile, you have to make sure that you're not spending more on your monthly lease payment than what you would be paying if you purchased the same vehicle in cash or with financing.

Leasing a car advantages:

• Leasing is cheaper than buying a new car upfront.
• You can drive a new car every two or three years once the leasehold is up.
• You might be able to trade in your leased car for another one when you need to (depending on the terms of the contract).
• You may be able to hire a car on a 28-day rolling contract in some cases.

Leasing a car disadvantages:

• Monthly payments can be costly, and you won't own anything at the end of the lease period.
• You'll be subject to mileage and condition restrictions.
• You'll need to commit to a set number of months or years for the leasehold.

 

4. The benefits of buying a car from a dealer

Buying a new car from a dealer has some benefits, the first of which is that the car will be fully covered by the manufacturer's warranty. You may also get discounts on financing and insurance if you go through them. A dealer will also have access to more cars than any individual seller would and they can provide a variety of financing options for you to choose from if needed.  They may even have an online site so you can see what is in stock before you travel to them so you can view the new models online first.

Buying a secondhand car is also a great way to make purchasing a car more affordable and you can choose to buy either from a private seller or a car dealership.  Choosing a car dealership can be the best way to buy a used car as it does come with some additional benefits. Many are associated with a mechanical garage meaning the cars will have been checked over by a professional and often serviced and with a new MOT.  If they haven’t been serviced then you can usually ask for this to be actioned before you complete the purchase.  Another benefit of visitng a dealership is the ability to test drive cars to find the right one for your driving habits and needs.

The downside is that they can be slightly more expensive than buying a used car privately as these are obviously businesses with overheads.  You can usually still barter with car dealers to get a better deal than the price shown on the car.  For peace of mind, when it comes to used car sales, paying a little extra to purchase a car from a car dealership usually means you’ll have a warranty with a used car in case of any problems in the first few months.  You can also search reviews online to find reputable car dealers that sell high-quality cars so you’re not ripped off.  Buying the car using a credit card, if accepted, also offers you additional financial protection that you won’t get from a private seller.

Buying a car from a dealer can be a great experience. They offer you more variety in the cars that you can buy and give you more options for financing.  The benefits are not just limited to the purchase either; they may offer maintenance and after-sales service to help with any issues that may arise.

Tips for negotiating a better deal with a car dealer:

Negotiating a better deal with a car dealer can help you save money on your purchase. Some tactics for negotiating a better deal include researching the fair market value of the car you want to purchase, arriving at the dealership with a pre-approved loan, and being prepared to walk away if you can't get the deal you want.

You can also try negotiating on factors such as the price of the car, the interest rate on financing, or the value of your trade-in. It's important to be polite but firm during negotiations and to be prepared to negotiate over a period of time, as the dealer may need to consult with their manager or make adjustments to their offer.

Buying a used car from a dealer advantages:

• The car will have been checked over by a professional and often serviced and with a new MOT.
• You can test drive cars to find the right one for your driving habits and needs.
• You may have a warranty with a used car in case of any problems in the first few months.

Buying a used car from a dealer disadvantages:

• The cars can be slightly more expensive than buying a used car privately.
• You may not be able to negotiate the price as much as with a private seller.

 

5. Is it worth buying a used car privately?

There is also the option to buy a used car from a private seller.  The main benefit is you can usually get a much better price when buying a used car from an individual seller rather than buying from a car dealership.  It also means your money is going to an individual rather than a large corporation, which you might prefer.  

However, while many people are honest, there are some who are not and may not tell you about all the issues a car may have.  If you opt for buying a car privately then it’s a good idea to have someone who knows about cars come with you to check over the vehicle to spot any potential issues.

One of the riskiest things about purchasing a car from a private seller is there's no warranty or guarantee on the vehicle, so if something goes wrong, it's your responsibility to fix it and you could be out of pocket if there’s a major fault.

It can also be hard to find out about the history of the vehicle without running your own checks beforehand.  You can find lots of websites online that run free car history checks with a registration number to tell you the car’s documented mileage, MOT history, any damages and whether it’s stolen.

It’s highly recommended to make sure the seller has proof of ownership for the car, such as registration, logbook and service records. You should also make sure that they have all of the relevant documentation for any modifications that were made to the vehicle.  Check out this list of seven things to check when buying a used car.

Buying a used car privately advantages:

• You can usually get a much better price when buying a used car from an individual seller rather than buying from a car dealership.
• Your money is going to an individual rather than a large corporation, which you might prefer.

Buying a used car privately disadvantages:

• There's no warranty or guarantee on the vehicle, so if something goes wrong, it's your responsibility to fix it and you could be out of pocket if there's a major fault.
• It can be hard to find out about the history of the vehicle without running your own checks beforehand.
• Some private sellers may not tell you about all the issues a car may have.

 

6. Opting to buy a brand new car: the pros and cons

Buying a brand new car can be a very expensive decision and the value of new cars literally depreciates the moment they are driven off the forecourt!  But don’t let that sway your decision as there are still many benefits.

The main pro of opting to buy a brand new car is that you are not spending any money on repairs or maintenance.  Most new cars won’t need an MOT for at least three years.  They are also going to have less problems than used cars, and if they do have an issue that is not caused by normal wear and tear, it will be covered by its warranty.  All new cars come with a warranty, usually of at least three years, but some are for seven years or to a maximum mileage (providing the car is serviced at regular intervals by approved dealers and various other terms are met).  It can also be luxurious to own a car that’s never had another owner and is 100% new.

The cons of buying a new car are that they can be more expensive than used cars and may have features that you don't need, forcing you to pay for extra features that you won't use.  The car will depreciate in value, as we already mentioned, but this is true for almost all cars so it may not be an issue.

Buying a brand new car advantages:

• You are not spending any money on repairs or maintenance.
• Most new cars won't need an MOT for at least three years.
• They are going to have less problems than used cars, and if they do have an issue that is not caused by normal wear and tear, it will be covered by its warranty.

Buying a brand new car disadvantages:

• They can be more expensive than used cars and may have features that you don't need, forcing you to pay for extra features that you won't use.
• The car will depreciate in value, which may not be an issue, but it's something to consider.

Alternative options when buying a car

As we mentioned in the opening paragraph, there are actually even more options than the above when it comes to buying a car!  So far, we’ve covered:

• Buying a car with a personal loan

• Hire purchase

• Leasing a vehicle

• Buying a used car from a dealer

• Buying a used car privately

• Buying a brand new car

So what other options could be left?  Well, if you don’t need a car all that often you could choose to hire a rental car as and when you need it.

Other options include using a car-sharing app such as Karshare where you rent cars from local individuals, rather than rental car companies.

You could even come to an arrangement with friends and family who live with you or nearby to use their car when needed, or to arrange a car share if possible.

Final word

Car buying is an expensive and time-consuming process.  it’s also a very imortant decision.  How you’ll fund your car and where you’ll buy it from is not always straighforward as there are so many different options. It is important to know what you are looking for before you go out and buy a car, how you will finance it and what your monthly affordability is if you require finance.

As this article has shown, there are many different ways to purchase a car. Some people choose to buy new cars, while others prefer used cars. There are also some who want to take advantage of the discounts and deals that come with leasing a car.  The simplest way to buy a car is to purchase it outright, but not everyone has the money for this.  Buying a car on finance is an option for those who want to spread the cost of the car over a period of time.

Hopefully this article has answered any questions you may have about the various car buying options available to help you decide which is right for you. 

 

 

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