dragon
Cash or savings
When interest rates are so low, it’s likely that your savings will not be earning much in a bank or building society account. So rather than keeping your savings and borrowing at a higher rate of interest, you could use them to fund all or some of the cost of the car.
Remember:
You should make sure you have enough savings left over for an emergency after you have paid for your car
If you don’t have enough savings to buy the car outright, you could use them to give you the biggest deposit possible
Even if you use money from your savings you may be better off buying the car on your credit card (although you should pay the bill off in full the next month) so you benefit from credit card purchase protection
How you're protected when you pay by card
Personal loan
DID YOU KNOW?
Personal loans are usually the cheapest way to finance a car deal, but only if you have a good credit rating.
You can get a personal loan from a bank, building society or finance provider so long as your credit rating is good). Make sure the loan is not secured against your home. Otherwise you will be putting your home at risk if you failed to keep up with repayments. Shop around for the best interest rate by comparing the APR (or annual percentage rate, which includes charges you have to pay as well as the interest).
Pros
It can be arranged over the phone, internet or face-to-face
Covers the whole cost of the car but it doesn’t have to
Can charge a competitive fixed interest rate if you shop around
Cons
There may be a wait for the funds to appear, although some lenders make funds available almost immediately
Other borrowing may be affected
Hire purchase (HP)
Hire purchase is a form of buying a car on finance and is paid in installments where payments are spread over 12-60 months and you usually (but not always) have to put down a 10% deposit. They are arranged by the car dealer and are often very competitive for new cars (less so for used cars).
When interest rates are so low, it’s likely that your savings will not be earning much in a bank or building society account. So rather than keeping your savings and borrowing at a higher rate of interest, you could use them to fund all or some of the cost of the car.
Remember:
You should make sure you have enough savings left over for an emergency after you have paid for your car
If you don’t have enough savings to buy the car outright, you could use them to give you the biggest deposit possible
Even if you use money from your savings you may be better off buying the car on your credit card (although you should pay the bill off in full the next month) so you benefit from credit card purchase protection
How you're protected when you pay by card
Personal loan
DID YOU KNOW?
Personal loans are usually the cheapest way to finance a car deal, but only if you have a good credit rating.
You can get a personal loan from a bank, building society or finance provider so long as your credit rating is good). Make sure the loan is not secured against your home. Otherwise you will be putting your home at risk if you failed to keep up with repayments. Shop around for the best interest rate by comparing the APR (or annual percentage rate, which includes charges you have to pay as well as the interest).
Pros
It can be arranged over the phone, internet or face-to-face
Covers the whole cost of the car but it doesn’t have to
Can charge a competitive fixed interest rate if you shop around
Cons
There may be a wait for the funds to appear, although some lenders make funds available almost immediately
Other borrowing may be affected
Hire purchase (HP)
Hire purchase is a form of buying a car on finance and is paid in installments where payments are spread over 12-60 months and you usually (but not always) have to put down a 10% deposit. They are arranged by the car dealer and are often very competitive for new cars (less so for used cars).