On 4 June 2019, the Financial Conduct Authority (FCA) released its new regulatory framework for peer-to-peer lending (P2P); a Policy Statement known as PS19/14. As you might imagine, it's a document which, following a three-month consultation, is a hefty read of no fewer than 102 pages.
The 5 best ways to finance your new car
The UK’s roads are a congested network. In fact, recent research shows that there are just under 26 million licensed cars in England alone. It underlines the fact that, despite having largely efficient public transport, having a car is still a necessity for most Brits.
It goes without saying that buying a car is a major purchase, and one you want to do correctly. After all, it is a depreciating asset, and the costs of ownership certainly don’t end when you sign on the dotted line. Indeed with running costs, maintenance and insurance, you’ll likely be looking well into the thousands of pounds each year.
So while securing a good deal on the purchase price is important, arguably what’s more vital is to pick something which is most likely to serve you well for years to come, as this will almost certainly save you money in the long term. If this means pushing the boat out a bit further than you originally thought in terms of budget for purchase price, then so be it.
What will help the cause is to finance the purchase in the most cost-effective manner that you can, and to minimise the interest and other charges you incur. Here are five different ways in which you can do that:
If you are in a position to pay for the entire cost of a car with money saved in the bank, then you’re onto prize number one. After all, with rates on savings as derisory as they currently are, there is little to be gained from letting your money sit idle (unless you consider the option of lending such funds through a platform like ours). The only word of caution here would be to ensure that this purchase doesn’t eat into your savings buffer, and thus risk leaving you short when it comes to covering other costs – car related or otherwise.
2) Hire purchase
This is an increasingly popular option for the purchase of new cars whereby you put down a deposit (usually 10 per cent), and then pay it off in instalments over a fixed term. It’s effectively a secured loan against your car, and rates are competitive; albeit usually only for longer-term agreements. The only real downside to this one is that you don’t own the car until you have made the final payment.
3) Personal loans
Personal loans are usually the cheapest option when it comes to car finance, provided you have a sound credit history. Many car buyers make the mistake of paying for a car on their credit card, or automatically assume the finance plan offered by the dealer is the best option. However, a personal loan will almost always offer considerably better value – not to mention that it offers tremendous convenience in that it can be arranged online, with minimal effort on your part.
4) Personal Contract Plan
This mode of finance bears some degree of resemblance to hire purchase. Essentially it involves paying the difference between the original selling price of the car and its resale price at the end of the agreed term (usually 1-3 years) – and doing so in monthly instalments. When the term is complete, you then have a couple of options…
Firstly, you can simply hand the car back to the dealer, shake hands and walk away. You could also pay the resale price and keep the car. Or alternatively, you can even trade the car in and engage in a similar agreement with a new car.
5) Personal lease
The virtues of a lease agreement are clear: You pay a set instalment each month, for a fixed period of time (usually 3 years), and which includes all maintenance and servicing. That means you don’t need to give a second thought to depreciation, and you’ll know exactly how much of your monthly budget to allocate. Yet the downside to this option, of course, is that you will not own the car by the end of the lease term. Added to that, there is usually a significant deposit involved, while you’ll likely be charged extra if you exceed the agreed mileage limit.
Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.
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