Financing a new car: which way is best for you?

  • All running costs covered, save for fuel and insurance.
  • Flexibility of withdrawing from contract with three months’ notice.
  • Low deposit.

Car subscription disadvantages

  • You never own the car,
  • Penalties for excess mileage and above-average wear and tear.

Example: Volvo XC40 1.5 T3 R-Design Auto (rolling 3-month contract, 12,000 annual mileage)

Monthly charge £589.00

Mileage surcharge/month £40.00

Total monthly payment £629.00*

Deposit (1 monthly payment) £629.00

*Minimum 3-month rolling contract

Personal Loan

Taking out a personal loan to cover some or all of the cost of a new car is one of the most straightforward methods of finance. You choose the lender, the best rate of interest available, and the period over which you’d like to repay the loan. You then effectively become a ‘cash buyer’, and the car belongs to you immediately, with no limits to how long you keep it, use it, or even modify it (although your insurers will need to know if you’re planning any upgrades).

Personal loan advantages

  • You own the car from the start.
  • No limits on usage.

Personal Loan disadvantages

  • No protection against depreciation.
  • Interest rates will vary according to your credit status.

Credit card

Some buyers may be able to use their credit card to purchase a new car outright, although many will not have a credit limit generous to do this, and even if they do, the selling dealer may not accept credit cards for all or part of the purchase price.

However, if you are able to use a credit card, and you can time the purchase immediately after your last statement date, then you could benefit from up to six weeks’ interest-free credit – possibly longer, if there are promotions available – provided you settle the balance in full when it falls due. If you don’t, interest can build rapidly, and the rates are a lot higher than with most other forms of finance.

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