There are many ways to borrow money in order to afford a car. Personal loans, hire purchase agreements, PCP agreements and credit union loans are just some of the most popular funding options.
Borrowing money can be convenient as it allows you to pay in installments over a long period of time. But it can be more expensive in the long run, resulting in interest fees and other hidden fees. On top of this, not everyone can get accepted for a loan. It’s also possible that you may already have too many debts to pay off each month and that you cannot afford extra debt repayments.
Fortunately, there are some alternative ways to fund a car. They may not be as easy or convenient, but they can be worth exploring if you’re looking for a debt-free way to fund your next vehicle.
Save up
If you already have some savings, these could potentially be used to buy a car in cash, preventing you from having to take out finance. Of course, modern cars are very expensive to buy and not everyone has enough savings to buy a new car outright. Taking time to build up your savings could be an option, but it could take some time. If you’ve got the patience to save up for a car, consider opening a high-interest savings account to put your savings contributions into – this will help your savings to build more quickly. You could even consider putting some money into stocks or other investments, but this is more risky.
Exchange your vehicle
If you already have a car, you could consider exchanging it for another vehicle at a dealership. You will only be able to swap it with a car of the same value, however if you have some savings you may be able to consider a part-exchange. This is when you partially pay for the value of a new car using the value of your old car, and then pay off the remainder using either savings or a loan. If you’re going debt-free, then you’ll want to make sure you have enough money in savings.
Consider a vehicle lease
When you lease a vehicle you are essentially renting it. Because you don’t own it, you cannot make modifications or sell it. At the end of the contract period, you also have to return the vehicle. However, you do have the option to take out a new lease on a new vehicle. Vehicle leases can often come with much cheaper installments than a loan – especially when choosing a vehicle with a low depreciation rate. Some leases may also include a maintenance package that pays for servicing fees and routine repairs. Your annual rates may be determined by whether you’re able to keep within an agreed mileage limit. Therefore, if you’re planning to drive long distances, a lease may not be the best option.
Get a company car
Some companies provide a company car as an employee benefit. If you’ve been thinking of getting a new job, consider looking for such roles – the car could be completely paid for by the employer, allowing you to save money on funding a car yourself. Don’t want to look for a new job just to get a car? Another option could be to ask your existing employer for a salary sacrifice. This involves taking a pay cut in exchange for an employer buying/leasing a car for you. This could involve buying a car on finance – however, it will be your employer taking on the debt, not you. The downside is that you have to be willing to accept a lower salary, which may not be affordable to live on unless it takes you into a lower tax bracket.
Win a car
This one is all down to chance. However, it’s possible to increase your chance by taking up ‘comping’ as a hobby. Comping involves entering as many competitions as you can to increase your chance of winning something. Entering competitions typically involves creating accounts and accepting emails – so you may want to set up a dedicated email account just for comping. To find competitions that are giving away free cars, simply use search engines and social media. Sign up to whatever you can and keep an eye on your emails to see if you win. Some competitions may involve paying to enter. You need to consider whether you’re willing to spend money – it could increase your chances of winning by enabling you to enter more competitions, but there’s no certainty.
