Financing a Car Purchase

In post bubble, Ireland finance is proving very difficult to get. So before you think makes, model, engine size, upholstery and colours it is essential to work how you are going to finance the purchase of your new car. Generally, your options are a hire purchase agreement, a personal loan or a lease.

Hire purchase
With limited lending funds from banks hire purchase is now one the most the most common form of finance. Under a hire-purchase arrangement, a buyer puts down a deposit and pays off the balance, plus interest, in equal payments. Some manufactures, e.g. Volkswagen and BMW are now providing finance directly to the customer and Ford, Renault, Nissan and Toyota also provide financing for their cars over instalment periods of three to five years. The type of finance provided is usually a hire purchase agreement. The key points to remember about HP are that you do not own the car until the last payment has been made. Also the longer the contract the more you pay so keep it as short as possible but don’t over stretch yourself dangerously.

Personal loan
In the past this was the most common way that cars were bought in this country and the immediate benefit to this option is that you own the car instantly. With a personal loan you repay it back over a fixed term. The rate of interest depends on the deal at the time. If you get into difficulty making the repayments you can ask your borrower to restructure the loan or at worst sell car to repay the loan. However if you are applying for a mortgage, an outstanding car loan could adversely affect the chances of your application being approved. If you are a member of the Credit Union it would be worth checking out their car loans.

Lease agreement
A personal contract plan (PCP) is a type of leasing agreement that offers consumers the option of handing back the car to the dealer at the end of the finance agreement, using it as a part-exchange for a new car, or completing a hire-purchase deal and owning the car outright. The overall advantage to this option is that all your motoring costs are in one easy payment.

The Bottom Line
Spend at least as long considering what finance to opt for as you did choosing the car. Shop around and make sure you know true cost of any deal on offer.

Author: Geraldine Herbert

Contributing Editor and Motoring Columnist for the Sunday Independent and editor of wheelsforwomen. Geraldine is also a regular contributor to Good Housekeeping (UK) and to RTÉ Radio One, Newstalk, TodayFM and BBC Radio. You can follow Geraldine on Twitter at @GerHerbert1

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