Often when we buy a new car it is too expensive for us to afford to buy it without borrowing some money. Cars are usually thousands of pounds and therefore many of us do not have enough savings to cover the cost of that. Therefore we have to borrow in order to pay for it. Even cheaper cars may be too dear because we have to also cover the other costs of a new car such as tax and insurance and these can sometimes be pretty significant.
There are many options for borrowing to pay for a car, the most obvious being a dealer. If you buy from a dealer then they are likely to offer you a finance deal to help you to pay for it. Make sure that you look carefully at what they are offering you as it may not be that competitive. Some may offer interest free credit and some other finance deals but it is worth asking questions before signing up. Find out if there are any administration fees, upfront costs, charges or anything else that you would have to pay. Also look into what they charge if you miss payments or want to pay the loan off early. As with all loans you should carefully check the terms and conditions before you sign up.
You could go to a bank or building society for a loan alternatively. You may find that they will be cheaper than a car dealer and so it is always worth comparing. Like the dealer, they may want you to use the car as collateral, which means that you will need to be sure that you make the repayments or else they may reclaim the car. There are many lenders to compare in this field and so it could be worth looking at a comparison website to see who might be the cheapest. It is worth remembering that there are other things that you should consider as well as price though, such as reputation and customer service.
Some people may choose to cover the cost with a credit card or overdraft. This could work for smaller value cars or if you have part of the money to put towards it. However, this can be an expensive way to borrow money. If you do not manage to pay it back quickly the fees will really add up and this could make the car purchase really expensive. Calculate how much the fees might be if you borrow this way and you will probably find that it will be better if you get a personal loan rather than borrowing this way.
Some people turn to friends and relatives to borrow money. This can be a cheaper way to borrow and can offer a solution to those people that find it hard to borrow money from anywhere else. There can be problems with borrowing this way though and so it is worth some careful thought. You need to consider that if they then run into financial difficulties they may need the money back, they may expect you to repay it quickly and you may not be able to or there could be other problems. If you do not have a clear written contract then you could disagree and fall out over it. It has happened in many families and it is not worth falling out over money like this, especially if there are alternatives that you can choose which won’t cause problems like this.
It would be a lot cheaper to save up for the vehicle rather than borrowing the money to pay for it. If you can wait a while or if you have some savings, then it can be wise to do this instead of borrowing. You may like to have savings as they are earning interest, but you will find that the interest charged on the loan will be much higher than the interest you are receiving on the savings so you would be a lot better off using them to pay for the vehicle. You may be able to sell some things to help pay for it as well. Most people try to part exchange a car they have and that can help. But you could also sell things from your home that you no longer need or want and raise some money. If you have a lot of possessions this could add up to a significant chunk of money. It is easy to do this using online auction sites or social media websites. It may take longer before you can buy the car but it will feel good to know that you have not had to borrow money in order to do so and if you have sold a lot of things, you will have cleared some space at the same time.