How To Prepare Your Finances For Buying A New Car

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Preparing to buy a car is an arduous process that takes a lot of thought and planning. This is due to the multiple ways a car can be bought. Whether you’re planning to buy the car outright with cash, do a finance agreement or go for a personal contract hire (PCH), there are a lot of factors to consider. This article will go through them all and give some insight into the routes you can go down.

The first thing to know is that, if you are planning on buying the car with cash, then the car will be yours from the beginning. It’s fast, simple, and effective but not always feasible. After all, a new car means a new insurance policy, so the cost of affording it does not necessarily end with its purchase. In this way, you will need to prepare your finances for the cost of the vehicle, its maintenance, the insurance, and the tax.

Buying A Car On A Financial Agreement

You may find that buying a new car on a financial agreement is a more suitable method. If you are planning on keeping the car long-term, then a personal loan is a good option. This involves the loaning of money from a lender, to be paid back with interest depending on the duration of the loan. Again, this depends on your circumstances, but if you are not prepared to finance the car outright and if you are not looking to change cars soon, then a loan is certainly more viable.

Another option is creating a personal contract purchase (PCP), which involves paying for the car in fixed monthly installments. The car, in this instance, will not belong to you. It will instead be owned by the finance provider until the duration of the contract ends. This, of course, has a few negatives. For one, you will not be able to sell the car and if you fall behind on payments then you could risk losing it. This is why it is important to take the time to work out all of your outgoings, and your credit score, and be confident that you can pay all of the finances monthly. This is financial preparation that is integral before making your decision, and if there are any changes of circumstance then you should communicate it to the financial lender.

You Could Drive Your Car On A Hire Purchase

A hire purchase, much like a PCP, also involves paying down a deposit and sending monthly payment installments to essentially ‘hire’ the car. As with PCP, this option can be detrimental due to high monthly costs, the potential to incur extra costs, and the very fact that the car does not technically belong to you. It is, however, advantageous if you are looking for fixed costs and flexible payment terms.

In preparing where you are putting your finances, it is always important to not just look into the money side of it. Make sure you are dealing with the correct sort of financial lenders. Just as you would choose a new car, you can choose who is the most suitable lender for you. It is up to you to find the best deal. Whether it be with a bank, a financing company, or the automakers, there are many methods and alternative rates to consider. Though note that it is very unlikely you will find a zero-percent interest deal.

Always Be Aware About Prices

Ensure that you know what you are looking for. When preparing your finance, it is not always so simple as looking for the lowest monthly cost for a car or the lowest interest rate. Often you will have to attain the price tag of the vehicle you are looking to buy, work out how much of a down payment you can make and how much you will be financing for the remaining figure. Take into account, then, the amount of months a loaner is offering along with their interest rate. Calculate this and then multiply the monthly payment with the amount of months the loaner has indicated you will be paying. If this number is higher than the original price tag of the vehicle you are looking at, then it is time to look for a different option.

Awareness is integral when preparing your finances. You will need to go for the best financial option for you, but understanding the different ways of going about it is the best thing you can do before making your decision.