Rather than purchasing a used car for your first, some of us have our sights firmly set on our dream car – unable to let go and face reality.
However, it is possible to budget and to be able to purchase your dream car without breaking the bank or getting into debt.
Necessary Agreements – The PCP
In most cases, payments are often less than what you’d pay in a hire purchase agreement as you pay the full price of the car, plus interest but minus the guaranteed future value of the car. In order to gain acess to the PCP Agreement, you must have check carried out before hands. This is because credit checks can highlight whether you’re eligible or not for such a scheme. The Personal Contract Purchase Agreement, is where the end value of the car is agreed at the start of the contract, so you can plan your payments accordingly.
Always evaluate your current monthly payments before you agree to a finance agreement, as being behind on your payments can lead to financial issues. You can place down a large initial deposit if you can afford it to lower your monthly cost. Saving a lump sum for a large deposit is easier than saving up for a car, while reduced monthly payments can really help out too. You can either pay off the future value of the car to become the full owner, hand back the keys or trade the car in as a deposit for a new finance agreement when it comes to the end of your PCP agreement.
Any damage to the car will be charged to you, so you must be prepared to take good care of the vehicle. If you have exceeded the forecasted mileage on the car, there will be further charges to pay however. This is because more miles decrease the value of the car.
Hiring a car
Hiring a car is rather similar to the PCP Agreement, it involves monthly payments with the option to purchase the car at the end of your agreement based on its new value.
10% of the car’s value is usually the cars deposit, but often you can pay more to reduce the follow-up monthly payments. The rest of the car is then payed off in instalments over a period of one to five years. The longer this period, the less you have to pay each month but due to interest charges, the total cost of the car becomes higher.
Is it possible to purchase a car with a credit card?
An advantage of purchasing is that it allows you to put down an even lower deposit than 10% and pay the rest of the vehicle off using a debit card.
Although this may seem like a useful alternative to you, some dealerships don’t accept credit cards when buying a car, therefore it would be worthwhile to check this beforehand.
As we can see, you are able to drive that dream car you’ve always wanted without forking out loads of cash and there are a wide range of finance options available. Save up what you can for a significant deposit and always make sure that you can cover the payments before signing any agreements. It’s best to consider all options here, as often the interest that you pay on a credit card could be significantly higher than that of a finance agreement.