Stephen
If you’re currently in the market for a new car, then it’s likely you’ve taken a look at many different ways to finance it. Very few of us can afford to purchase a car outright, and let’s face it, those who can probably wouldn’t have clicked on an article that talks about buying a car with a personal loan. It can be difficult to navigate these financial agreements and know which one is the best for you. A car salesman might make them all seem like they can work just fine. But you’re not looking to find a car finance agreement that’s ‘fine’ you’re looking for the best deal possible. Sometimes, the best deal doesn’t involve the car dealership at all – it involves the bank.
We recently carried out an independent consumer study where we asked 2,000 car buyers a series of questions. From this, we learned that 59 percent of car buyers would prefer to take out a personal loan from the bank to finance a car purchase, instead of a car finance deal. So, why is this? Very rarely we’re opting to borrow money from banks than any other source. Well, the reason is flexibility. For this we need to explain the restrictions around car finance deals.
Car finance deals and their restrictions
First of all, you have a hire purchase plan. This plan allows you to own your car outright, and the term of the agreement is fixed at three or four years, which means there is a high monthly repayment figure. A figure that you may not be able to afford.
Secondly, there is a PCP. This type of agreement brings your monthly repayment figure into something more affordable, however at the end of your agreement there is a huge balloon payment if you want to keep the car and own it outright . An amount that you may not be able to save up and afford in time for the end of the agreement, meaning you can’t keep the car even if you wanted to.
The restrictions are that the hire purchase plan allows you to own your car for many years, but affording those monthly repayments is out of the question. The restriction with a PCP is that you never own the car, so you become trapped in a cycle of monthly payments that really, you could do without. So, what should you do? Turn to the bank.
Why choose a personal loan with the bank
A personal loan to buy a car is like most agreements. You borrow the lump sum from the bank and pay it back, usually with interest. The benefit of using a bank is that you can determine the repayment period. You may choose to repay your car over six years instead of three, significantly bringing down the monthly repayments. You can also shop around for the best interest deal meaning that in total, you will end up paying less compared to getting your finance agreement with the car dealer.
If you are someone who wants low monthly repayments and to keep your car for a long time, then a personal loan with the bank is probably your best bet. It combines the best of both worlds.
What’s the difference between borrowing from the bank and the car dealership?
You will be amazed at how little of a difference it makes to you. Realistically, you’re just paying your bank instead of the car dealer’s bank. It’s that simple. The benefits of borrowing money from a bank instead of a car dealership tends to be that you get a better deal. They are more aware of your finances, it’s not just a credit score, and they can give you advice on how much you can realistically afford. You should never shop without knowing your budget.
Downsides of buying with a personal loan
While it can be incredibly beneficial to own your car outright, there are perks to being on a finance agreement with a car dealership. In some cases, your MOT and servicing might be thrown in for free for a year. You may get some deals on parts and labour when you take your car in and of course, there are helplines associated with your vehicle you’ll have fast and direct access to. But if these aren’t the sort of perks that you’re looking for, head to your bank. You never know, they might also be giving out some perks for borrowing with them.
As more people drive less, work from home more, and cars have all the gadgets and essentials you need, fewer people are regularly trading in their car for a better model, one with fewer miles and better technology. It didn’t surprise us at all to learn that more people would rather borrow from the bank than the car dealers themselves.
Looking for a new car or car finance?
If you’re looking for car finance deals, personal car loan or even car finance with no deposit, contact the ChooseMyCar team. As car finance specialists, we understand that it’s not always possible to have the perfect credit score, whether you’ve not taken out credit before, or have experienced credit problems in the past. Bad credit doesn’t have to mean you can’t buy a car.
