Media post: Hire Purchase? Personal Contract? Leasing? Ways to Finance a New Car Compared

There are a multitude of ways to finance a new car, each with its own advantages and disadvantages, and it can be difficult to work out which is the best overall. We’ve put together a quick comparison of some of the most common types.

Hire Purchase

You buy the car with a loan secured against the car itself, meaning that the vehicle is not fully yours until the full sum is paid off, and failure to pay could mean losing the collateral—in this case, the car. Many dealers offer this and it’s easy to arrange with low monthly repayments, but it’s fairly expensive over the full term of the loan so your money might go further if you can afford another option.

Personal Contract

This works similarly to hire purchase, but instead of paying back the full value of the car, you pay it less the car’s resale value and at the end of the term of the loan you have the option to either return the vehicle to the dealership or buy the car outright. This is nice because it keeps your options open, though its an expensive option overall with one big bill at the end if you want to keep the car.

Leasing

You lease the car long term from the dealer for a set period of time. Monthly payments are a little higher and there is sometimes a deposit to pay, but you always know how long you will have the vehicle for, and the dealership covers service costs within the leasing period as long as you stay within an agreed mileage. Because you don’t own the car with leasing, you also don’t need to worry about resale value.

The Verdict

Owning things is overrated—for our money the winner is leasing, which is flexible when you arrange it, so it can suit your needs, and then has fixed terms, so you have peace of mind that you always know what you need to contribute and what you can expect from the arrangement. The true beauty of this form of finance is just how stable it is and how it keeps unexpected costs that you’re not ready for to a minimum.