Evidence suggests that more people across the UK than ever before are buying cars on finance rather than purchasing cars in cash outright. Buyers are turning to hire purchase (HP) or personal contract purchase (PCP) deals instead.
Detailed below are some of the reasons why people prefer to buy cars on finance in the UK:
1. Avoid Lump Sum Payments
Paying for a car in a single lump sum isn’t an option for most people. Saving up for a deposit can be tricky enough – coming up with £10,000 or £15,000 in cash to buy a car isn’t always practical or possible. With car finance the buyer has the opportunity to spread the costs over several years. Far better than wiping out their savings entirely or being forced to save for years to eventually buy the car they need.
2. More Choice, Better Quality
Car finance also makes it possible to buy vehicles your typical budget would not stretch to. Most car buyers do not have the cash available to pay for a car outright. Those that do may be somewhat limited with the cars they can afford. If you only have £5,000 in total, the car valued at £15,000 you had your eye on is completely out of reach. When you buy a car on finance you can pick up a better car with a higher value than you could otherwise afford. Not to mention a safer and more reliable car that may also retain its value better.
3. Fixed Borrowing Costs
With a good car finance deal you know exactly what you can expect to pay for the term of the loan. Most car finance deals attach fixed rates of interest and clear lending costs. This means there’s no risk of the overall cost of the loan increasing with time, just as long as you keep up with the repayments.
Perks and Privileges
Car finance can be better than a traditional loan because it sometimes comes with additional perks and privileges. For example, some service providers and dealers will throw in free road tax, free insurance or maybe just a free tank of petrol to sweeten the deal.
5. A Safer Financial Future
Finally, to wipe out your savings entirely on a new car is to remove any financial safety net you had. As it’s difficult to know what lies ahead it’s important to plan for any eventuality. With a good car finance deal, you know exactly how much you can expect to pay on a monthly basis. Your savings remain intact and you’ll be in a better position to deal with any subsequent financial shortfalls. Car finance provides the opportunity to pick up the car you need at an affordable price without the risk of plunging you into the red.