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If 2025 is the year you’re looking to buy a car, you may be overwhelmed by the amount of funding options you have. Drivers are spoilt by the number of ways you can buy a car but what is the most popular and cost-effective route to take? In the guide below, we’ll look at all the ways you can buy a car and find out which is best. From buying outright with cash to using a car finance deal, which funding option will be right for you?
Buying a car outright with cash.
There’s no denying the cheapest way to pay for a car is with cash. That’s because unlike other options like finance or leasing, there’s no interest to pay on top of the value of your car. Many dealers and seller also like cash buyers and may even be more likely to negotiate the price when you pay with cash. Being a cash buyer also has other benefits like you’ll be the owner of the car from the start of the deal and there’s no ties to a lender or mileage restrictions. Buying your next car with cash means there’s no debt accrued and there’s no monthly payments to be made, the car is yours to own and keep! The only real drawback of buying a car with cash is that brand new and nearly new cars are expensive to buy and it may be unrealistic for many drivers to save up enough money for one lump sum payment.
Spread the cost with finance.
Car finance is one of the most popular ways to get a car. Like we’ve mentioned above, the cost of new cars makes buying with cash unrealistic for many drivers. Even purchasing a used car with cash may be a struggle for some, so car finance allows you to spread the cost of your chosen new or used car into affordable monthly payments. Car finance is subject to status and won’t be available to everyone who applies. A lender will agree to either loan you the money to buy a car or buy the car from a dealer on your behalf and you’ll make monthly payments back to them.
Car finance terms can vary based on the type of finance you choose the amount you can afford each month, the loan amount, your credit rating and more. Before you dive into buying a car on finance, you should explore the different finance options on offer.
Hire Purchase car finance.
Probably the most straight forward type of car finance, hire purchase is a popular choice for many drivers. It’s a secured loan which means it uses an asset to secure the loan. In this case, the asset is the car, and it can be used as collateral if you don’t meet your repayments. HP deals can help you get a car on finance with no deposit and pay for it in affordable chunks. Once you’ve been approved for a loan and found the car you like, the lender buys the car from the dealership on your behalf. You then get the car and you make monthly payments back to the lender. This means during the agreement; the car won’t be yours and the ownership lies with the lender. Once all payments and the final option to purchase fee has been paid at the end of the agreement, the ownership of the car transfers over to you. Hire purchase is a great way to get a car and pay for it over an agreed number of years, with the intended ownership of the vehicle at the end.
Personal Contract Purchase.
Personal Contract Purchase (PCP) is actually a form of hire purchase, but it has a completely different structure. PCP offers lower monthly payments than HP because the payment schedule isn’t split into equal amounts. Instead, smaller payments are made and a final large balloon payment is left till the end of the deal. Drivers are attracted to PCP deals because there is more flexibility and you don’t necessarily have to own the car at the end of the deal. PCP deals do have more restrictions though and you’ll need to set an annual agreed mileage and agree to damage charges too. At the end of your PCP deal, you can pay off the balloon payment and keep the car. You also have options to trade in your current car and get a new car on PCP or you can simply hand the car back to the lender.
Taking out a personal loan.
A personal loan can be a form of car finance, and they usually have the lowest interest rates on offer. A low interest rate can help you save money in the long run and means you won’t pay as much back to the lender. Unlike HP and PCP deals it’s not a secured loan either. This means there’s no collateral involved. A personal loan can be used for anything from buying a car to home improvements. You apply for how much you want to buy a car outright and if accepted, the full amount gets deposited into your bank account. You then make the agreed monthly payment back to the lender until the end of your chosen term. You can use the money to go and buy a car and own the car from the start. There’s no mileage or damage charges and you’re free to sell the car when you’re ready.
So, there are the best ways to buy a car in 2025. The one you choose can be determined by your budget and your availability of cash. If can buy with cash, then you should. However, car finance can also be a cost-effective way to get a car. Consider all buying options first and happy car shopping!
