What is the best way to pay for a new car if you don’t have cash?

Buying a car will usually be one of the single largest purchases of your life, and so it’s no surprise that many people are unable to afford to buy a car with cash. We all know that having cash-in-hand to pay for a new vehicle is the best way to go about things, but realistically, this isn’t possible for most people. So what’s the best way to pay for a new car if you don’t have cash? Let’s take a look at a few options. 

PERSONAL LOANS

Auto loans are one of the most common ways for people to pay for a new car, allowing people to set up monthly repayments that they can afford within their budget. The total loan amount can be adjusted depending on how much money each individual can pay up-front, and the person has some degree of control over how quickly they repay the loan meaning that they can pay it off more quickly to save money on interest. To get the most out of a personal loan, it’s important that buyers do their research on interest rates and choose the cheapest option, but they should also pay attention to the loan terms and conditions to make sure that they have the flexibility to pay off the loan early if they want.

CREDIT CARDS

Another way in which people are able to finance a new car is by putting the amount, or a portion of it, onto a credit card. When used correctly, a credit card can be a cost-effective way of getting a new car, but in order to make sure that the deal works for you, and not the other way around, you need to try and get a 0% purchase credit card, or one with an interest rate as close to 0% as possible, and will also want to try and get cash back or rewards on your spending. Remember that many 0% credit cards are only 0% for a set period of time, so be sure to pay back the amount in full before it goes up and you are charged interest. 

PERSONAL CONTRACT PURCHASE (PCP)

PCP is another popular option, especially for those who like to trade in their vehicles often and who don’t have a huge amount to pay on monthly repayments but want a new car. During a PCP agreement, you will pay a deposit for the vehicle and then a set monthly payment over the course of 2-4 years. At the end of the agreement, you will then have the option to walk away, to pay a lump sum and to own the car outright, or to exchange it for a new one and to continue a new PCP agreement. If your plan is to own your car outright at the end of the agreement, then PCP agreements can end up more expensive, and you will need to do some number crunching to see if it is worth it. What’s more, it’s important to remember that most PCP agreements come with terms and conditions, like milage restrictions which can affect your monthly payments. 

HIRE PURCHASE PLANS

Last but not least, you have the option to try a hire purchase plan, in which you pay a deposit and then spread the rest of the car cost over a fixed period. Until your final repayment date, you won’t own the car outright but as soon as the payment has been made the car will be yours. Hire purchase repayments do tend to be higher than those on PCP plans because you need to have paid off the full value of the car by the end of the agreement. That being said, deposits are often a lot lower and the maths can make sense if you cannot get a good interest rate on a personal loan or a credit card. 

So there you have it – a few different ways in which you can finance a new car when you don’t have cash-in-hand. 


Photo Credit: Acura

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