We appreciate that standard car finance such as leasing or hire purchase is not for everyone. Perhaps you don’t have a big deposit saved up or your credit score is less than perfect – but it doesn’t mean that you shouldn’t be able to get the car of your choice.
For many people, having a car is a way to get to work and earn income or take the kids to school and so having a car is essential. With this in mind, we are pleased to offer a list of alternatives to car finance.
A personal loan is used for borrowing up to £25,000 for a fixed term of 1, 3 or 5 years and can be used as a deposit for a car. This is ideal if you want to own the car outright and you wish to keep it for a long time. For example, buying a big family car if you have small children.
Available from banks, building societies and financial providers, the rates tend to get lower the more you borrow. So for a loan ranging from £1,000 to £2,000, you may have an APR of 7.7% compared to £15,000 to £25,000 which may cost around 3.4% APR (Source: MoneySavingExpert).
Even though the interest rates are lower, you will pay more overall as the loan term is much longer.
The loan is secured against the asset that you purchase so if you do not keep up with repayments, there is the risk that your vehicle can be repossessed to offset the amount you have borrowed.
It is important to compare the rates of APR offered by banks and lenders to ensure that you are getting the best deal. Funds may not be transferred to your account instantly with some institutions taking a few days or weeks to complete the transfer.
Credit cards are used to finance 1 out of 8 cars in the UK. The deposit required will be put on a credit card and repaid at the end of the month or when the next statement is due.
Financing a car through credit cards can be an expensive option, with minimum interest rates at around 16%. The best option is to find a 0% balance transfer card or one that offers cash back, as this will limit the amount you have to pay and avoid running up a large debt.
If you only require a car every now and again, maybe you can avoid having to buy a car altogether and only purchase one on a ‘pay-as-you-go’ basis.
With car clubs in the UK such as Zip Car, you will pay an annual membership of around £60 a year and you will have access to a number of cars in different locations across the country. All you will need to do is book which car you want and where you want to pick it up from and you will pay an hourly rate for hiring it.
In addition to getting the car you need, you will not have to pay annual tax, insurance or maintenance.
If you are using one of the club cars more than once a week, then it may not be cost effective and you should consider another option.
If you need a car for a temporary period such as a work placement or holiday, you may benefit from simply renting a car from an established company such as Hertz or Avis. From only a few pounds a day, this could be a more cost-effective solution to purchasing a car and paying all the costs associated with owning a car.
With companies like these located all across the country, you have the flexibility to choose a centre near you and give back the car wherever you may be.
A fast-growing technology trend is lift-sharing apps. Startups like LiftShare and BlaBlaCar allow you use your mobile phone to find someone making your journey and carpool with them. With trips from London to Manchester as little as £14 one-way and some boot space included, this could be a cheaper alternative to car finance.
We are proud to be working with leading finance providers in the UK to find the best deals for our customers. So whether you are looking to borrow money for a car, bike or van or an emergency purpose, be sure to look through our website for free calculators, tips and comparison tables.
Our site is completely free to use and if you enter your details, we can find the best quotes for you without selling your information to any third parties.