Advice

How to pay for your new car

Which is the best form of finance to use when you're buying a new car?

Words by: First published: 11th May 2015
It can seem as if there are almost as many ways to pay for a car as there are cars to choose from. No one way is right for everyone, and making the right choice can save you thousands in the long-run.

Whether you want to keep the car long-term or like to change cars every few years, our advice explains the choices and helps steer you through the pros and cons.
Cash
If you have the money, paying for a car upfront can be the simplest way. Low interest rates on savings could make this attractive.
Loan
You can take a loan from a bank or building society. You own the car from the start and, unlike dealer finance, it’s not linked to your choice of car.
Hire Purchase (HP)
You pay a deposit – typically something like 10% of the car’s price – and make monthly payments over a period of years, but you don’t own the car until the end.
Personal Contract Purchase (PCP)
PCPs help keep monthly payments low by deferring a lump sum till the end of the plan – when you can choose what to do next.
Personal Contract Hire (PCH)
You rent a car from a dealer or hire company for a certain number of years. At the end of the period, you give the car back – but you’ll have to stick to mileage limits.
Credit Card
You can take advantage of special offers, but not every dealer will accept them; and even those that do may not let you put the full amount on a card.