For most of us, our motor vehicles have become an essential part of our daily lives. In order to meet all of our commitments to our work, and our family, we need the freedom of being able to get anywhere we need to go at any time. However, there is no getting around the fact that cars are costly things to buy.
Luckily, there are a few finance options that can help us get a vehicle without having to pay a sum of thousands of pounds in one go.
What Is Hire Purchase?
If you want to pay for the car gradually and own it at the end of the deal, then a hire purchase can be an appropriate option. It involves getting the car which still belongs to the dealer and making repayments which cover the cost of the vehicle. After your last payment and an additional fee of one to two hundred pounds for getting it swapped over, you will become the official owner of the vehicle.
As the name suggests, you are essentially renting the car throughout the repayment process. The debt is secured against the vehicle, so if you cannot make your agreed payments, then the dealership can just take the car back. If you have paid less than a third of the payments they do not even need to go through the court to do so.
What are Leasing/Hire Agreements?
If you just want to have access to a vehicle, but don’t want or need to own it, then leasing might be your best choice. Leasing involves essentially renting a car from a dealership for an agreed term before handing it back at the end.
There are often certain restrictions involved with a deal like this as the dealer wants to ensure it is in a fair condition at the end of the lease. For example, you might only be allowed to drive a certain amount of miles throughout a year, and so on.
If you can’t keep up with your repayments the dealer will just take the car back. If you are not concerned about owning the car, and if you are not likely to struggle with the restrictions, leasing can be an affordable option.
How Can Personal Loans Get Me a Car?
It is possible to take out a personal loan to pay for the car outright. This would involve borrowing, for example, £5000 from a loan provider. You would use this money to buy your car outright, then gradually pay back the loan.
This is a more favourable option for many people as you will own the car straight away, meaning you can sell it at any time you want and drive it without restrictions. It also means that if you cannot handle the repayments, they cannot take your car as it is yours. Unmanageable debt is still a problem, but your vehicle will be safe.
What Is a Personal Contract Purchase (PCP)?
Buying a car on PCP can be very affordable, but like a lease, you do not own it, and there may be restrictions. When buying with PCP, your dealer will tell you the price of the car and an estimation of its value after a period of time (typically three years), depending on the vehicle itself and how you plan to use it. If the car is worth £10,000 and the dealership estimates it will be worth £6000 in three years, at the end of the period you will owe £4000, plus interest.
As long as the car is in acceptable condition and you have not massively exceeded your mileage limit, then you can hand the car back at the end of your term with no problems. You could also pay up the rest and just buy it.
You will never own the car throughout the deal, and in the event you cannot make the repayments the dealership can simply repossess the vehicle.
Are You Struggling with Car Finance Repayments?
If you have found yourself struggling to meet the repayments on a car finance agreement, then it is time to get some help. Without intervention, your debt may spiral out of control, your credit rating can be tanked, and you will very likely lose your vehicle.
At Debt Free Life our team is very experienced in keeping you in control of your essential assets and have helped thousands of people to keep their car. Call us now on 0800 808 5142 and let us keep you on the roads!