If you’re looking to upgrade your car or are just in the mood for something new, then you have a lot of options. Many people think going to a dealership is the only way to buy a car, but this isn’t true. In fact, there are lots of different ways to buy a car that might even save you money. The key to getting a good deal is knowing your options and choosing the one that’s best for you.
In this article, we’ll go over four different ways you can buy a car and when it might be the best choice for your situation.
As we mentioned, the dealership is probably the most popular way to buy a car. You can walk the lot, test-drive different models and get a good idea of what you’ll be spending. However, you also have to deal with potentially pushy salesmen and haggling down a price you can afford. That’s a trade-off many people aren’t willing to make anymore.
Another factor to consider with a dealership is they can sometimes give you better auto loan rates than other sellers. If you don’t go through your bank to finance your car, dealerships have programs you can enroll in to finance your purchase through them. This makes the buying process a little easier.
2. Hire Purchase
Buying a car with a hire purchase is similar to buying a house. You’re required to put down a deposit, typically at least 10%, and you pay monthly installments against the remaining balance plus interest. The trick with hire purchasing is that your loan is secured against the value of your car. That means if you miss a payment or can no longer afford payments, your car can be repossessed.
Typically, you need to work with a financing company to do a hire purchase agreement. Most dealerships don’t offer this type of financing. Remember to weigh your options when financing because companies will offer different types of plans and deals, so you need to choose one that fits your financial situation.
3. Personal Contract Purchase
This type of purchase is a good option for people who like to switch out their cars every few years. Essentially it’s agreeing to a loan that’s worth the value of the car at the end of the loan period instead of its value new. It sounds complicated, but it’s actually simple when you break it down.
Let’s say you bought a car for $10,000 with a $1,000 deposit. You still owe $9,000 on the car, but you agree with your financer that the car will be worth $5,000 at the end of two years. So you only have to pay $4,000 over those two years. At the end of your loan period, you can decide to pay the final $5,000 lump sum and keep the car or give the car back and not pay anything more.
You probably know that leasing is an option, even if you’ve never done it before. It’s a common alternative to purchasing a car for people who like to get a new car every two or three years. Unlike personal contract purchases, though, you will be paying on the full value of the car, which often makes the monthly notes higher than other options.
Another thing to keep in mind when leasing is that at no point do you own the car. Leasing is similar to renting an apartment. You’re responsible for the upkeep and maintenance of the car and at the end of your lease term, you can choose to trade in for a new car or pay out your lease and buy the car.
There are more ways to buy a car, but these four are the most popular and often the most flexible for your budget. Consider these options next time you start saving up for your new ride to see which can save you the most money and best fit your lifestyle.