With car prices on the rise this is great news for those of you who are selling your car but not so much for those of us who want to upgrade our journey to work from that cramped bus to a shiny new car, that’s where used car finance comes in. However, there are a few ways to cut costs. So if you’re truly over public transport, keep reading.
Financing a Used Car
If saving money is your ultimate priority in the decision making process, then opting for a used car is more than likely the best option for you. Furthermore, just like it is possible to purchase a new car on finance, it is also possible to purchase a used car on finance. This is a great way to spread the cost so a large sum of money isn’t leaving your bank account all at once.
The Pros of Financing a Used Car
Financing a used car NI wide is the most popular method of purchase. Probably because there are a number of benefits of taking out a loan to purchase a used car:
- Low down payment and up-front cost
- Reasonable APRs
- Helps Build Your Credit Rating
- Allows You to Keep your Savings
- You can Afford to buy a better car
There are three ways to finance a used car Northern Ireland wide:
- Personal Contract Purchase (PCP)
PCP means you will pay an initial deposit and then a specified number of monthly payments (typically over three, four or five years). You have the choice of paying a ‘balloon payment’ to buy the automobile outright at the conclusion of the contract term, or returning the car to the dealer. If you choose for the latter, you’ll be able to use the equity you’ve built up as a deposit on your next vehicle.
Pro: The main pro with this type of finance is that if you look at the amount you pay on a PCP and then look at the amount you would pay on another loan, the amount is much smaller.
Con: With this type of finance option, you will not own the car at the end of the agreement and if you do want to you will need to pay a ‘balloon’ payment of the Guaranteed Minimum Future Value (GMFV) at the end of the contract.
- Hire Purchase (HP)
This sort of financing appears to be comparable to a PCP agreement, but the final monthly payment turns you into the outright owner of the vehicle, eliminating the need for a final “balloon payment.” Because you’re paying for the car itself rather than covering depreciation fees, you’ll spend extra each month.
Pro: The specification of the vehicle that you get in this type of financial agreement is often much higher, with the vehicle tending to be much newer than what could be bought outright with no large upfront investment.
Con: The loan for the vehicle is secured against it, meaning that if you get into financial difficulties, the vehicle will be repossessed. As well as this, if you miss payments on this, it will negatively affect your credit rating.
- Personal Loan (PL)
Personal Loan finance when buying a car is still one of the most popular finance methods. The reason behind this is that when you go through your own bank to obtain this, you get a much better rate. Certainly a method to look into and your bank will best advise you on this.
Pro: There is a huge advantage with this method, that is because with a bank loan you own the car and if it becomes an issue and you are falling behind on payments, you can simply sell the vehicle and repay the loan.
Con: With any financial commitment, it is important to only take out what you can afford to pay back or you will run yourself into problems down the line.
So What’s Right For Me?
No matter which finance option you choose, both of them mean you will be borrowing money and this carries inherent risk.
So the answer is “it depends.” In general the choice of whether or not to finance a used car depends on you and your situation. I.e. your savings, your income and various other factors. Therefore it is hard to give genuine recommendations without knowing the specifics.
Heading down your local car dealer can walk you through the various finance options that are available to you and how each affects your repayments. Once you have all the relevant information at hand, you’ll be able to make an informed decision on which option best suits you based on your circumstances.
If you are looking for a place to start then your own bank is always a good option. Banks can usually offer a range of different products depending on how you would like to borrow and as an existing customer, you may be able to get a competitive rate.
However, if a genuine recommendation is what you are after, be sure to contact one of the dealerships at Carlover NI, such as Shelbourne Motors or McKinney Motors who can help walk you through the entire process and advise which option is best for you.
Sign up to Carlover NI today by selecting one of the options below:
