There are few things more exciting than buying a new car and, with 2.9 million vehicles registered for the first time in Great Britain in 2018, it seems a decent chunk of the population would agree. Although there is much to look forward to when it comes to getting a fresh set of wheels – the smell, the smooth ride and the look of envy on your friends’ faces, to name just three – it’s not all fun and games.

Whether you’re in the market for a nippy sports convertible, an Allied Mobility vehicle for the disabled or a practical family saloon, deciding how to pay for a new car can cause a major headache, with so many options now available to the modern consumer. So, which are the different finance solutions and what are the pros and cons of each?


This often works out as the cheapest solution, because you’re paying all the money upfront without taking out a loan or entering into a payment plan, which can include interest rates that increase the overall cost of the vehicle. However, having several thousands of pounds to pay out in one lump sum may not be a viable solution for many people.


Taking out a personal loan can be a fast and efficient way of securing the funding you need, as long as your credit rating is strong enough for the lender to deem you a reliable borrower. Shopping around can help you to secure the very best deal available, although once you take into account the interest rates then the monthly outgoings can prove to be higher than some alternatives.

Hire Purchase

This means you will pay a deposit and then make fixed monthly payments over a certain period of time. Once that period has ended and you’ve made your final payment, the car is yours. A hire purchase can be straightforward to sort out and the repayment terms can be flexible, although it could be a long time before you officially own the car, depending on the payment schedule you have agreed upon.

Personal Contract Purchase

PCP is similar to hire purchase except that the monthly payments tend to be lower. That does mean, though, that the overall figure to repay may be higher. You are essentially taking out a loan for the difference between the car’s value when it is new and what it will be worth once your repayment schedule comes to an end. At that stage, you can either trade the car in and start again, hand it back and pay nothing or you can keep the vehicle by making one final “balloon” payment to cover the difference between its initial and current value.

Personal Contract Hire

Otherwise known as leasing, this option means you pay a fixed monthly fee, which can be slightly higher because all your service and maintenance costs are included. At the end of the term, you return the car without the option to keep it for yourself, while there are often financial penalties to contend with if you exceed the pre-agreed mileage limit of your leasing terms.

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