How to find the best car finance deals

Buying a new car

If you’re wanting to start the new year with a few changes, you might’ve identified a new car as your number one priority.

Maybe your current vehicle has seen better days and starting to cost more maintaining it, or you just fancy a change after 5+ years of driving the same model. Like many people who are considering a new car this year, you’ll be wanting to get value for money on the best options available. But how can you spot the best deals and identify options that you should avoid at all costs? With a reported 9 out of 10 buyers confused by car finance options, it’s easy to see why some help is worth your while.

Used and New

Depending on your car needs, you’ll be choosing between whether you want something brand new or a little older. Choosing between this can mean a difference of hundreds, even thousands of pounds depending on the make and age of your chosen vehicle.

As much as everyone would like a fresh off the factory production car, the best deals are found with slightly older models. This doesn’t have to be 5-10 years old, with values of vehicles dropping considerably within the 1-3 year bracket. If you’re thinking of buying a brand new car, look to see if you can find the same make and model that’s slightly older.

You’ll be surprised how much in savings you can make with a vehicle that’s only done a few miles. Once you have decided on the type of car you want, the finance options available can become confusing if you’re unsure what to look for.

Lease Options

You may like the option of leasing the car you want rather than buying it outright. Usually, the options for this are personal contract purchase (PCP) or personal contract hire (PCH). You may have seen these terms and found it difficult to differentiate them both; that’s because they are very similar. The main difference between both of these types of leasing is that PCP allows you to own the vehicle at the end of the lease term if you choose.

PCH doesn’t give you this option and you’ll have to return the car. Both options allow you to long-term hire a vehicle and pay a monthly amount, however PCH can work out cheapest because you borrow the full value of the car.

With PCP, you only part borrow the value, giving you the option to pay the rest to buy the car at the end of the term. PCH would mean you have higher monthly repayments because the full vehicle value is borrowed, but in total is less to pay back.

Loan Options

You may decide to avoid the car dealerships finance options completely and buy in ‘cash’. A reason this can work out well is that you only pay the value of the vehicle to the dealer or seller, with no added interest that you would accrue with finance options.

You can find car finance deals available that are an alternative to leasing and dealer finance options, allowing you to have lower interest costs and affordable monthly repayments. Last year, it was reported that the Financial Conduct Authority (FCA) is cracking down on the industry due to interest rates, costing motorists huge amounts in extra costs with finance options. With the FCA’s changes due to happen at some point this year, it’s a great time to look at your alternative finance options for the best deal.

Hire Purchase

Hire purchase agreements or HP for short, allows you to spread the cost of the vehicle you want with interest, usually requiring a deposit upfront. This is one of the most common types of car finance offered by the dealers on both new and used vehicles.

They can be great because you’ll see exactly what you’re paying upfront as well as the interest charge, with fixed monthly payments required until it’s paid off. You’ll need to consider the interest being charged, as mentioned with the news above so that you are happy with the amount you’ll be paying.

As long as you feel the interest charge is fair, you may find the value of the car is much less than buying it outright in cash. That’s because many dealers want you to take out the finance option and are willing to lower the vehicle value for you to agree.

Shop Around

As with purchasing anything this year, always shop around when looking for a new or used car. You’re unlikely to get lucky by going with the first deal you see and get the best deal available first time, so check through your options and be wary of additional charges added. Hopefully, by following this advice, you’ll take advantage of the many great value finance deals available today.