Finance Being Used By More When Buying A Car

Almost 60% of people have used finance to buy a car over the last 12 months, the highest percentage for four years.

According to the Finance & Leasing Association (FLA), 57.9% of people buying new cars in the last 12 months used finance to do so.

In August the number of new cars bought on finance was up 17% compared with the same period last year – leasing was up by 38% and Personal Contract Purchase (PCP) by 24%.

Paul Harrison, Head of Motor Finance at the FLA, said: “Motor finance has an edge over other purchasing options in current economic conditions as customers are able to negotiate a finance package to suit their budget, whether it is a leasing, PCP, hire purchase or a loan agreement.”

MoneyHighStreet comments: “There are a number of ways to finance buying a car, including such as hire purchase, personal contract purchase (PCP) or personal leasing which you can arrange via a car dealer.

“There are also other options you can use, including getting a personal loan, a mortgage top-up or using your credit card.

That said, you need to be very careful to select the option that best suits your personal finance siutation and not opt for something that you cannot afford, that as a result of which you may end up with a debt that you cannot repay.

“For example, whilst you may look to use your credit card, the interest rates payable are likely to be higher than some other forms of finance. They may prove a good option for a short term loan, for example if you have arranged other finance and are waiting for it to come through.

“There are some credit cards that offer 0% on purchases for a period of time which may be worth considering.

“Equally you may consider topping up your mortgage. Whilst the interest rate may appear attractive to do this, be aware that the mortgage term may be a long one and thereby unless you can pay off capital without incurring significant early redemption charges, you may end up paying a higher amount of interest as you have to pay it for a longer period of time.

“Don’t forget that however you finance your car, the costs don’t stop there – the cost of car insurance, maintenance and general running costs all add up!”

The FLA is the leading trade association for the motor finance sector in the UK. FLA members provided £19.0 billion of motor finance in 2010 and financed more than half of all private new car registrations in the UK.