Whether it’s your first set of wheels or your dream car, we want to help you get it. If you’re buying a car and wondering how you’ll pay for it – you’ve come to the right place.
Deciding how you’ll pay for your car can be a challenge too. We can help by explaining the different payment options, so you can work out which is best for you.
Deciding how much you can afford
Your budget and the car’s price are likely to be the main deciding factors when buying a car. If you’re not sure where to start with a budget, you can get help from MABS on how to budget .
Before you start looking at cars, let your budget help you decide how much you can afford.
Use our simple My Budget tool to work out what you can afford to spend on buying a car.
Be realistic about your budget and you will make sure you make a smart financial, rather than emotional, commitment to your new wheels. Don’t forget to consider ongoing running costs once you’ve bought the car.
Saving up for a new car
Paying with cash is normally the cheapest way to pay for your car. Even if you don’t think you will be able to save enough to buy the car outright, you could save as much as you can afford to pay the biggest deposit possible. That way you will be spending less on loan interest.
After you’ve done your budget, you can see if you can have any extra money to save towards the cost of your car. Maybe you can cut back on your spending. Be realistic about what you can afford to save each month.
Once you’ve decided to put aside some money each week or month, it’s a good idea to put the money into a savings account in the post office, credit union or bank. This way you cannot access it too easily.
Use our advice on how to build up savings to help start saving towards your new car. We have advice on finding money to save and other money-saving tips.
Ways to pay for your car
There are two main ways to pay for your car. You can pay with cash or use a car finance option (a loan, hire purchase or personal contract plan).
|Ways to pay
|Things to think about
|Find out more from the CCPC
|Cash or savings
|Paying cash is normally the cheapest way to buy your car. You also own the car outright.
|Paying for your car using cash or savings
|If you don’t have enough savings to buy a car, personal loans are usually the cheapest way to borrow money over the long term. A personal loan from a bank or credit union lets you spread the cost of buying a car. You pay back the money in monthly instalments and pay fees and interest rates to the lender. You own the car and owe the loan.
|Paying for your car using a personal loan
|Hire purchase (HP)
|Hire purchase is often offered by garages and car dealers. Under HP, you rent the car, and usually pay the cost in regular instalments to your lender (who is usually a bank or finance company). The car isn’t yours until after the final payment, unlike with a personal loan.
|Paying for your car using HP
|Personal contract plan (PCP)
|A PCP is another form of HP. You pay regular instalments and do not own the car until you have made the final payment. The major difference is that you pay lower monthly instalments but owe more money at the end of the PCP agreement. You must also stick to certain restrictions on mileage and commitments around servicing the car.
|Paying for your car using PCP
Looking after your new car
The cost of a car does not stop once you’ve paid for it. There are ongoing expenses with running a car. Some running costs such as fuel, maintenance, insurance and tax are predictable and can be calculated into your budget.
Running a car can also involve unwelcome surprises. Having savings set aside for unexpected costs can help if you’re hit with a repair or maintenance bill. Get more advice about building up an emergency fund.
Get more help
Visit CCPC’s Money Hub for impartial and comprehensive information about financial products.