New car buyer

Used car buyer

Ways to pay

Ways to pay

 The information in this guide was last updated on 26/02/2014

Buying any car can be expensive, so make sure you give careful thought to the best way of funding it. A lot depends on whether you want to absorb the brunt of the cost up front, or spread it over a period of time.

If you're buying new or used from a big dealer, it's easy to just arrange the finance with the dealership that you are buying the car from, but this may not be the best deal for you. Take your time to consider all the options available before you negotiate for the car.

Also, compare the Annual Percentage Rate (APR), which takes into account the interest rate and the charges that you will have to pay. However the APR advertised may not be the rate that you are actually offered. Some rates depend on your credit score and the amount you are borrowing.

Options available to you...

Personal loan

Personal Loan

You might consider taking out a personal loan to cover some or all of the purchase price of your new car.

Buying a car is one of the most popular reasons for taking out a loan and it allows you to pay in instalments.

Debit card

Debit Card

Paying with a debit card isn't much different to paying in cash, as the money will leave your account and be in the dealer's hands almost instantly.

The main difference is a debit card might protect you from any problems down the line as you could be covered by your card's dispute process. Just be sure to read the small print and know what rights you have. Find out about Nationwide's current accounts.

Credit card

Credit Card

Credit cards allow you to spend up to an agreed credit limit. Many have introductory offers that may include interest free periods for purchases and promotional features such as cashback.

Credit cards allow you to pay a monthly minimum payment or to pay the balance in full, as long as you make your payments by the stated payment date you may benefit from interest free credit during an introductory offer period. If you miss a payment you will face charges.

Crucially, credit cards protect you from problems down the line as you could be covered by your card's dispute process which can give you rights against your card issuer in addition to those you have against the seller of the car. Find out about Nationwide credit cards.

Cash

Cash

Sometimes cash is the simplest way to buy a car, and with money on the table, dealers can be persuaded into giving you a better deal.

The only problem could be if the car develops a problem later on because you're not protected by the extra cover debit and credit cards can give you.

Part exchange

Part exchange

Here, the dealer takes your old car as payment (or usually part payment) against the car you want. You then make up the difference with another method of payment.

Aside from taking into account all the factors outlined above, you should also double-check the dealer is giving you a fair value for your car. Most will only offer a trade price, so it's worth trying to get more for it by selling privately first.

Hire purchase

Hire purchase

A Hire Purchase agreement is usually set up directly with the car dealership. It is an agreement where the purchase price of the car and agreed interest is paid back by monthly instalments.

This type of loan is secured against the car, so you don't own the car until all repayments have been made. Usually a deposit is required.

Personal contact plan

Personal contract purchase

This is similar to a Hire Purchase agreement, but rather than paying back the full amount of the car, you agree to pay back the difference between the sale price and its price for resale.

When the term comes to an end you have the option to pay a final payment (resale price of the car) and keep the car, hand the car back and pay nothing or trade the car in and start all over again.

This finance method results in lower monthly payments, but to own the car you will have to pay the final settlement, which can be substantial in many cases.

Lease purchase

Lease Purchase

Lease Purchase, sometimes known as Personal Contract Purchase, allows you to make a final payment which is deferred to the end of the agreement, but must be settled to own the car. You don't get the option to return the car at the end of the contract.

Running costs