Car finance is one of those things that everyone has heard of, but which isn’t always easy for everyone to understand. Fortunately, our service here at CarFinanceGenie is car finance made easy; we’re passionate about helping families to figure out whether car finance is the best option when they are considering upgrading their car.
What is car finance?
Car finance is an umbrella term for a few different ways to borrow the money you might need in order to buy a new or second-hand car. This also includes leasing a car for a period of time with the option to buy it outright at the end.
Some families may initially think there’s little point in applying for car finance if they have the money already sitting in their bank accounts that they could use to purchase the vehicle outright straight away.
That’s an understandable stance, but the situation isn’t necessarily as ‘clear cut’ as that. Taking out a car finance deal can be a great way to spread the cost of a car over a longer period of time, for instance. This could help to leave more money in your bank account for those unexpected ‘emergencies’ all families have to deal with from time to time.
What are the different types of car finance?
There are a few different types of finance that call under the ‘car finance’ umbrella. These include the likes of a car loan, hire purchase (HP), personal contract purchase (PCP), and credit cards.
A car loan involves agreeing the amount you wish to borrow with your bank, and how long you will need to borrow it for. You will then pay the lender back in monthly instalments with the pre-agreed interest.
Hire purchase (HP), meanwhile, is exactly as it sounds. You will make monthly payments to a car finance company to hire the vehicle, and once the final payment has been made, you will own it. HP is often arranged directly with a car dealership, and you can choose to repay your car purchase over a term of up to five years.
With PCP, the loan you take out only covers the depreciation of the car. This is because PCP is effectively a long-term rental. At the end of the contract, you can choose to return the car, pay an additional final payment to keep it, or trade in the vehicle for a new PCP.
You might also finance a new family car by purchasing it on your credit card. However, some dealerships do not accept this method of car finance.
Is there a better option than car finance when you’re seeking a new family car?
Overall, the question of whether car finance is the best option for your family depends on your specific personal requirements. If you have the cash to buy the car outright to hand, then you might prefer the simplicity of doing this, without having to worry about ongoing monthly payments.
However, if you don’t have the money to hand or simply prefer to keep more ‘rainy day’ cash in your family’s bank accounts for those unexpected events when it may be needed, a car finance deal might make a lot of sense. And if that’s the case for you, why not consider applying for your own next car finance arrangement through CarFinanceGenie?