Financing your car

Here at Perrys we can offer you support and guidance towards finance your car in a quicky and easy method. Visit the Perrys Finance page for more details.

Here we’ll go through the many different methods a UK motorist can follow when financing their car purchase. Each method has its own set of advantages to suit different motorists in various circumstances.

Paying by cash

When it comes to financing your new car, paying by cash enables a quick, easy transaction. It also gives you a higher chance of being able to haggle to get a good price on a new car.

Should you wish to pay by cash, it would be prudent to use your credit card to place a deposit on the vehicle. Doing this gives you additional legal protection if something goes wrong with the car, as the credit card issuer has joint responsibility to sort out disputes over payments.

Paying by loan

Paying by a loan organised through a bank or building society gives you additional bargaining power, as the monies are paid to you before you buy the car, and the car dealer still has the money paid up front in full.

Shop around for the best annual percentage rate (APR) on your loan, as the personal loan market is extremely competitive, and you should be able to get a good rate of interest.

Pawnbrokers and moneylenders may be tempting, but be aware of the high interest rates. When approaching a dealer, avoid telling them that you are raising the money with a personal loan, as it will give you more leverage when haggling for a good price.

Paying by credit card

Should your credit card issuer have a low interest rate, using a credit card can be a good way of financing your new car.

Introductory rates from many credit card companies give the new car buyer rates of interest as low as 0% over periods of up to one year. However, go over this introductory rate of interest and you will be paying at a rate that can be higher than personal loan rates from your bank or building society, so it is prudent to pay off the balance on your credit card before the introductory rates expire, enabling you to save hundreds of pounds in interest charges.

Hire purchase

A popular and effective way to finance your new car is called hire purchase (HP) This can work out as a good alternative to other methods of payment, especially if the list price of the car is higher than many personal loan limits, which are typically limited to around £20,000.

However, the interest rates for hire purchase plans are usually more than personal loan rates. So remain wary that you can often have higher monthly instalments to pay off.

In addition, the provider continues to own the car until the full amount is paid off, giving the dealer an option to claim back the car at any time should repayments not be made, unless you have repaid more than a third of the value of the car, whereupon the company needs to take you to court to recover the vehicle.

Personal contract purchase

Personal contract purchase, also known as personal contract plans (PCP), enables you to purchase a car with a deposit against the vehicle, and then make monthly payments to the Finance Provider.

Before you take out the plan, you will be given an estimation of the Minimum Guaranteed Future Value (MGFV) of the vehicle. If you wish to pay the final balance, and keep the car, which is based on both the predicted mileage and depreciation over the course of the PCP plan. The MGFV is used to estimate the monthly and final payment should you wish to keep the car at the end of the agreement.