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Venture Site - Options available when paying for a new car

There are a wide range of options available to people when buying a new or used car. Each of these options comes with its own benefits and drawbacks which will affect different people in different ways. It is vital to weigh up the pros and cons of each option before making your purchase. Given that buying a new car is the second most expensive item most people ever purchase, behind their home, it will pay in the long run to make sure that you select the very best method.

Paying in cash

Apart from the obvious drawbacks regarding the security of carrying around large sums of cash, paying in used notes is not always the best option when purchasing a new car. Firstly, some dealers may actually refuse to take the cash, especially if your car is particularly expensive. Secondly, paying by using large sums of money can arouse suspicion as to where this cash was procured; again, this is most likely if you are paying for a rather pricey new car.

If, however, you do choose to pay in ready cash for your car, you can be safe in the knowledge that the car is definitely yours, and there will be no issues regarding the future affordability of loan repayments down the line. Likewise, as the car is 100% yours, you could indeed sell the car and cash in on your assets if times become particularly hard. Finally, some dealers may actually prefer someone paying by using cash rather than a card as it means that they avoid having to pay credit card fees on the purchase, which could result in a small saving for you!

That said, a much safer option than paying in cash would be using a debit card, as there would be no danger of your cash falling into the wrong hands. Don't dwell too much on the rather large number visible on the chip and pin machine before you hit 'enter'!

Paying by using cash or a debit card relies on you having the entirety of the balance of the cost of the car either about your person or in your account. As most people don't have that kind of money to hand usually, there are often finance or credit agreements used.

Using a credit card

If you choose to pay by using your credit card, it is best to ensure you have a card with a long 0% interest deal. This way, you can actually pay for the car upfront, but pay it off over the term of the 0% deal, providing you with a free line of credit.

Be aware that many dealers will be hit with a processing fee for dealing with a credit card payment and could possibly pass this cost directly to you. Whilst paying off the cost of the car within the 0% time is by far the best way to approach using this method, the balance left over once it ends will be subject to rather large interest charges and could end up costing a vast amount if not managed correctly.

Leasing a car

When leasing a car, you do not own the vehicle but rather pay to borrow it for a set time frame. This can vastly reduce the price that you would pay to drive a prestige vehicle for a couple of years but will leave you without a car at the end of the contract, as it will need to be returned to the lease company.

Personal Contract Purchase

PCPs are fast becoming one of the most popular ways to purchase a car. A highly flexible way to own a vehicle, you choose the length of your term, and at the end of your contract have the choice of paying a final payment to own the car outright or walk away with no obligation.

One of the drawbacks with PCPs is that if your personal circumstances change during the length of the term and you become unable to make the payments, you are likely to lose the car and all monies paid previously.

Hire Purchase

Hire purchase agreements spread the cost of motoring, allowing you to choose how long you want to make the payments and giving you the opportunity to specify one from a wide range of cars. Similar to the PCP deal, with a fixed price being paid each month, your budget can be set, although your car will be at risk if your payments cannot be made for whatever reason.

A special thanks to Louis Rix, finance expert & Director at for writing and contributing this informative guide.