How to Finance a New Car

With various different options available, financing your new car can seem daunting at first. But at Lloyd Motor Group, we’re here to help you find the perfect solution so that you can get behind the wheel of your dream vehicle. Below, our guide to financing your new car will explore the various different options available, from PCP to Personal Loans, making your journey to car ownership as smooth as possible.

What are the different car finance options available?

Personal Contract Purchase (PCP)

With PCP, you're essentially renting the car with an option to buy it at the end. PCP splits the price of the car into affordable chunks: a deposit, monthly payments, and then a final optional balloon payment. At the end of the contract, there’s 3 options: pay the balloon payment and own the car, trade the car in for a new vehicle and start a new PCP contract, or give the car back (Subject to vehicle mileage and condition).

Advantages: PCP typically offers lower monthly payments than hire purchase, because you’re mostly covering the depreciation. It can be a great option for people who like to change their car often, as it allows you to drive a new car every few years with the option to change.

Considerations: Mileage restrictions apply, and exceeding them incurs charges. You also don't own the car unless you choose to buy it at the end.

 

Hire Purchase (HP)

With HP, you pay an initial deposit, and the rest of the value of the car is paid by monthly instalments. Once you’ve made the final payment, the car is yours.

Advantages: HP also doesn’t usually come with mileage restrictions. At the end of the term, there’s no large cost to own the vehicle as with PCP.

Considerations: You won't own the car until you’ve made that final payment. Hire purchase is usually more expensive than PCP.

 

Leasing, or Personal Contract Hire (PCH)

PCH is like renting a car for a fixed term, with no option to buy at the end. It works by leasing the car for an agreed period of time and making fixed monthly payments, and at the end of the contract you simply return the car.

Advantages: PCH can offer the lowest monthly payments of all of these finance options. There’s also the option for maintenance costs to be included in the payments.

Considerations: You don't own the car at the end of the contract. Mileage restrictions apply, and exceeding them incurs charges.

 

Personal Loan Car Finance

Personal loans aren't car-specific but can offer flexibility. They involve borrowing money from a bank to fund the car purchase. This means that you’d instantly own the car, and you then pay the loan back to the bank, with interest, over an agreed time period.

Advantages: You own the car from day 1, which means no mileage limits.

Considerations: You’ll need a good credit score to be able to get the best interest rates, and your monthly payments may be higher than if you were to opt for a finance option like PCP.

 

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Extra Tips When it Comes to Financing Your New Car...

1. Consider a larger deposit: Putting more money down reduces the loan amount.

2. Consider Every Factor: Factor in insurance, registration, taxes, and maintenance when budgeting for your new car, to make sure it’s affordable.

3. Build up your credit score: It can be a good idea to boost your credit score as best as you can before doing the deal. The higher your score, the lower the interest rate you'll qualify for.

The best finance option depends on your unique needs and budget. Consider your driving habits, financial situation, and long-term car ownership goals before making a decision. With careful planning and this handy guide, you'll be behind the wheel of your dream car in no time.

At Lloyd Motor Group, our team of experts are here to make financing your new car as easy and straightforward as possible. Browse our range of new cars online today, or contact your local Lloyd retail centre.