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.
If you have the money, paying for a car upfront can be the simplest way. Low interest rates on savings could make this attractive.
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.