Buying a car is one of the most costly purchases in your life. Some people spend £20,000 on a new car, and then they drive it for a handful of years before selling it and spending the same amount on a new one. It’s an expensive thing to buy, so you need to explore different ways of making this purchase.
That brings us to car finance. If you’re looking to buy a car, then you’ve definitely encountered this. However, you may be unsure what it really is, how it works, and if it can help you save money when buying your car. So, here’s a short guide to help you understand everything:
What is car finance?
Car finance refers to different methods of helping you buy a car. Typically, they all revolve around the idea of splitting up your payments over an agreed period. For example, instead of paying £20,000 for a car all in one go, you put down a deposit and make monthly payments until the costs are covered.
Some car dealers offer personal loans – or you can get one from a bank or other lending institution – which help you finance your car. A popular car finance option is called hire purchase. Here, the car dealer gives you the car, and you pay a deposit – normally around 10%. You then make regular payments every month, and you’re effectively renting the car. The difference between this and car leasing is that you own the car when the final payment is made.
Effectively, it helps you spread the cost of buying a car over an extended period, rather than paying for it all in one go.
What are the advantages of car finance options?
The key advantage is that you don’t have to spend a substantial sum of money all in one go. This makes it much easier on your finances. You won’t have to save up for as long, and you can alter your budget to accommodate this new monthly payment. When paying for things in full, you lose a lot of money right away. This can impact your budget and make it harder for you to live while you wait for your cash resources to return.
Secondly, you have a lot of control over your car finance method. You’re not forced to borrow more than you can afford. Not only that but as you can see on the Reed Autos website, you get to choose how long you want the borrowing period to be. This lets you pay back the costs over a longer period, making it even more manageable for your monthly budget.
Lastly, car finance lets you own the car. This means you can sell it and re-gain some money at a later date – you can’t do this with leasing.
Can car finance help you save money?
Technically, you’ll still pay the same price for the car. So, you don’t save money in that sense. But, by splitting the costs over a long period, this can help you manage your money and continue to put some aside. If you opted to pay in full, then you may have to scrap your savings until your bank balance starts to improve.
In conclusion, car finance is something to be aware of if you’re buying a new car. It’s the most manageable way of buying a car, and it’s perfect for people who don’t want/can’t afford to pay the full price of a vehicle upfront.