How Can I Afford a New Car?

August 12, 2013 at 4:16 PM Leave a comment

Note: This is a guest post.

Buying a new car is one of the single most expensive purchases you will make in your lifetime. Consequently, it is quite important that you are absolutely sure that you are looking at a vehicle that will meet your needs and that you can actually afford it.

There are many ways in which you can finance the purchase of a car, though not all will be suitable in certain circumstances. Here we take a look at the different ways one can afford a car and their various benefits and disadvantages.

Can you afford a new car?

The first thing to actually think about when it comes to looking at purchase options for a vehicle is whether you can actually afford it at all. Take a good look at the balance of your UK bank account and consider what sort of income you’re expecting in the near future against likely outgoings.

If it turns out you just can’t find the money to make the monthly installments without the risk of non-payment, it’s probably a good idea to think about a new car at a later date when you are in a more financially stable position.

Establish budget

After establishing whether you can afford a new car, the next step is to set a budget that you won’t exceed in any way. This will give you a better idea of what kind of cars you should be looking at, what you can afford, and whether a new vehicle is realistic.

Different finance options

There are a variety of different car finance plans and possibilities for those making a new purchase, each one tailored to meet the needs of a different type of buyer. The simplest type of finance will usually be a personal loan from your bank. However, there are other forms of finance that are a lot more complex but may give you a bit more freedom in the future.

For instance, the Personal Contract Purchase (PCP) keeps payments low and gives you the option to return the vehicle at the end of an agreed period for a pre-determined sum. You can buy the vehicle outright for this sum or trade it in for a newer model.

Though this may sound like a great finance plan, it was created to make purchasing a newer model the most financially beneficial option, meaning owners are locked into only owning cars from specific manufacturers or dealers. All finance plans have their pros and cons so it is important that you establish exactly which is right for you.

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