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What is The Ideal Way to Fund Your Next Family Car?


If you’re in the market for a new car, you may be wondering what the best way is to fund it. It’s important your next family car is right for those weekend trips, fit for purpose and fits in with your budget. Drivers are now spoilt for choice when it comes to ways to buy a car. From buying with cash, to multiple finance options, there is sure to be a way that’s right for you. The guide below looks at different car funding options and helps you decide which is best for your circumstances.

Purchasing a car with cash.

The best way to buy a car is with cash. It’s the cheapest and most cost-effective way to get a car because there’s no interest to pay on monthly payments, and you usually have more wiggle room to haggle the price. Buying a car outright with cash also means you will be the legal owner of the vehicle from the start, and you can modify it and sell it when you like. However, it can be hard to save up for one lump sum payment for a car. If you can’t afford to use your savings to buy a car with cash, you could consider finance or leasing.

Car finance

There are multiple types of car finance you can use to buy your next car. However, a personal loan, hire purchase and personal contract purchase tend to be the most popular amongst UK drivers. Car finance should only ever be taken out with a reputable car finance company and the lender will need to assess your eligibility before they decide if they wish to offer you finance or not. Read more about each below to find out which is best for you.

Hire purchase.

Hire purchase is one of the most straightforward ways to finance a car. Hire purchase is a secured loan, which means the lender pays the dealer on your behalf for the car you want. You then make monthly payments back to the lender until the end of the agreed term.


The whole loan including interest is split into equal monthly payments over the term so at the end of the deal, the car will be yours to own. However, during the agreement, the lender will stay in ownership of the car. If you fail to meet your repayments during the term, the lender has the right to take the vehicle from you.

Personal Contract Purchase.

Personal Contract Purchase is a form of hire purchase and a secured loan. However, its structure is very different. Instead of paying off the full loan in equal payments, you make lower monthly payments to pay off part of the loan. Much of the cost of the loan is then divided into a final balloon payment at the end of the deal. If you wish to keep the car, the balloon payment must be made. You can also hand the vehicle back to the dealer or use any positive equity in the deal towards a new finance agreement on a different car. There are a few rules associated with PCP, such as excess mileage charges and damage limitations, so it’s worth exploring more.

Personal Loan.

A personal loan is different from hire purchase and PCP deals because it’s not a secured loan. This means there’s no collateral against the loan, and it can be used to purchase anything you want. A personal loan is when a lender agrees to borrow a set amount of money and it gets deposited into your bank account. This means you can buy a car just like a cash buyer and be the legal owner of the car from the start. You then pay the lender back over an agreed term until the end of the deal.


Banks and building societies offer personal loans, which tend to be stricter with who they lend to and may only offer loans to those with good affordability and high credit scores.

I am leasing a car.

A car lease is essentially a way to hire a car for a long period of time, but you will never own it. It’s a good option for people who want a new car but aren’t bothered about owning the vehicle at any point. Usually, you pay an initial fee at the start and then make monthly payments until the agreed end date. Leasing can generally give you low monthly payments on a brand-new car and even include maintenance fees in the deal. Just like PCP, there may be additional costs associated with leasing such as exceeding the agreed mileage. Hence, it’s worth reading all paperwork before you commit to signing on the dotted line.