It isn’t just used cars you can negotiate the price on, you can also use your haggling skills to bag a brand-new car for a great price.
But timing is everything when it comes to buying a new car. We've looked into how you can finance a new car purchase and the best time of year to get a great deal.
Buying a new car can be a costly investment, but there are a number of different ways you can pay for one:
When it comes to buying new cars there are two types of car finance - Hire Purchase (HP), and Personal Contract Payment (PCP). Both options require you to pay a deposit upfront and then monthly payments for a set amount of time. But that’s where the similarity ends.
HP agreements are for the entire value of the car, minus the deposit paid. At the end of the agreement, the car is yours, as long as you’ve kept up with all the payments.
PCP agreements differ in that you only pay back a portion of the car’s value. This means the monthly payments are lower than with HP but it also means that you don’t own the car at the end of the agreement. Instead, you’ll have three choices - hand the car back, part-exchange it, or pay a lump sum to buy the car outright.
PCP could be a good option if you’re on a tight monthly budget, but then you’ll need to consider your options at the end of the agreement.
Not all dealers accept credit card payments for new cars, and there are pros and cons to putting your brand-new car on a credit card. Interest rates on credit cards might be higher than with finance options, and increasing your level of borrowing will have an impact on your credit utilisation rate.
But it’s not all bad news. If you’ve got the cash to buy a car then putting it on a credit card that offers rewards could be a good way to earn cashback, air miles, or other incentives. Just be sure to pay the balance off before interest starts accruing.
Credit cards with introductory 0% interest rates are a useful way of spreading the cost of a new car. But if you don’t pay the full balance before the end of the introductory period, you’ll be charged the standard rate of interest for the remainder.
Paying for a new car with savings means you won’t have to pay any interest and your credit file won’t be affected. You also won’t run the risk of getting into difficulty with lengthy loan agreements. If you are thinking of using the money that you’ve saved to purchase a new car, it’s always worth thinking about keeping a bit of it back for those unexpected emergencies.
Personal loans can be used for almost anything and if you’ve got a good credit rating then you should be able to get a loan with a good interest rate. Personal loans can be arranged quickly, and you’ll own the car straight away, unlike with HP and PCP. But you’ll need a good credit rating to get the best interest rates, and you’ll need to be sure you can keep up with all the payments. Work out how much you’ll end up paying with an online loan calculator.
If you’ve got bad credit, you could still buy a new car although your options will be reduced. The first thing to do is check your credit file and see if there’s anything you can do to improve your chances of getting credit.
Speak to the car dealership as they’ll have experience of advising people with bad credit. They might be able to help or pass you on to a company that specialises in car finance. Financing with HP or PCP could be an option because the car remains the property of the finance company until the end of the agreement, meaning they could take it back if you run into difficulty.
If you’re not eligible for a personal loan, then a guarantor loan might be an option. Having a guarantor gives the finance company more security making them more likely to offer you credit.
If you’re a member of a credit union they might be able to help you finance the purchase of a new car.
Buying a used car may mean you’ve got more options to choose from, but you’ll need to consider maintenance costs and thoroughly research the car’s history.
Buying a brand-new car means you get to choose the specification, and newer technology offers benefits such as increased fuel efficiency and advanced safety features. New cars also come with a manufacturer’s warranty, which could last between three and seven years - although these warranties don’t cover wear and tear items like brake pads.
If you’re worried about depreciation, then think about buying a car that’s a few months old. Dealers often anticipate sales and so buy new car stock in advance. This means they’re able to negotiate the price, so don’t be afraid to haggle.
December is normally the best time of year to buy a new car for two reasons. Dealerships will have sales targets to meet at the end of the quarter, and sales will naturally be down because people will be thinking about Christmas spending instead.
Disclaimer: We make every effort to ensure that content is correct at the time of publication. Please note that information published on this website does not constitute financial advice, and we aren’t responsible for the content of any external sites.
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
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