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5 Little Known Ways to Finance Your Car

Posted July 21, 2020 by EasyFinance.com to Finance 2 0

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Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.


Deciding to buy a car is not easy. You are either torn between purchasing one on cash or finance. A car is probably one of the most expensive things you can buy. Therefore you must do it correctly, considering it is a depreciating asset.

There are many ways in which you can finance your car. Most people prefer to use cash or savings to purchase a vehicle. It is arguably the cheapest method you can use to acquire a car. It is because you do not have to pay interest. However, when you decide to buy a car using cash, make sure that you retain some for emergencies.

You can also finance your car using a loan. You can receive Sydney car loans from a bank or a finance provider, as long as you have a good credit rating. Before accepting the loan, make sure that it is not secured to your home. Otherwise, your home will be at risk if you fail to repay the loan. You can find competitive interest rates when you look around.

There are many other options you can choose when buying a car. That said, here are five little known ways to finance your car.


Hire Purchase

Hire purchase becomes an option when you need a car but don't have enough cash to purchase one. In hire purchase, the loan is secured against the vehicle. The main requirement is that you have to pay a certain percentage of the total amount upfront.

After paying the deposit, you can use the car as long as you pay monthly installments for an agreed period. In most cases, it is the car dealer who arranges the hire purchase terms.



Easy to arrange.

Require a low deposit.

The repayment period ranges from 12 to 6o months.

Different car dealers offer different interest rates.



The car will only become yours when you finish the last payment.

Short term agreements are expensive.


Personal Contract Purchase

Personal contract purchase is yet another way you can finance your car. However, it is somehow similar to hire purchase. The main notable difference is that you pay lower monthly installments compared to hire purchase agreements. Regardless, the amount of money you pay back will be higher than the cash price.

In this method of financing, you don't have to pay the full cost of the vehicle. Car dealers calculate the difference between the price of a brand new car and its expected value at the end of the agreed hire period. As a result, you only receive a loan to pay for that period.

When the hire period expires, you can decide whether to return the car to the dealer, start the process again, or pay a balloon payment to keep the car.



The repayment period ranges from 12 to 48 months.

The deposit is as low as 10%.



You will have to pay extra charges if you scratch the car or exceed the agreed mileage.


Credit cards

Using a credit card is yet another way to finance your car. You can decide to pay the full amount or a fraction of the purchase price. On the plus side, you receive extra protection just in case something does not go as planned. It is only possible when you pay monthly payments.

The disadvantage of using a credit card to purchase a car is that not all dealers accept them. Also, some charge a handling fee.


Peer to peer loans

Peer to peer loans allows individuals to borrow money from each other without involving lending institutions.

It is a must that you have a good credit score to access the loans. The credit score will also dictate the interest rate. Refusing to repay the loan can affect your credit score.


Personal Contract Hire

You only have to pay a fixed monthly to use the car. Note that you do not own the vehicle. You will have to return it to the dealer once the agreed period expires. The amount you pay will cater for maintenance and servicing. The monthly rates are a bit higher compared to personal contract purchase.

Before choosing the best way to finance your car, make sure that you have a good credit score and can afford monthly payments. Compare interest rates to avoid paying more. Always remember that the first deposit determines the interest rate.   

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