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This page is :
> Motoring
> Buying a car
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Payment
The purchase of a car is likely to be one of the largest expenses you make.
You need to think carefully about the options open to you. There are usually
four:
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cash: the easiest and most cost-effective way of paying for the vehicle:
if you have cash saved you can buy outright and immediately
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Motability (
www.motability.co.uk):
the Motability scheme allows you to use your Higher Rate Mobility Component
of the Disability Living Allowance or the War Pensioners' Mobility Supplement
to hire or buy a car. If you purchase your car using Motability, you take
advantage of special terms organised by the organisation with dealers, insurers
and manufacturers. Around 4% of new cars are bought through Motability
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personal loan: from a bank or building society. This will provide you with
a lump sum of money ? sometimes as much as ?25,000 ? which
is paid back monthly either at a fixed or variable rate. Disability will not
affect your chance of getting a personal loan, but your financial situation
might: if the lender feels you will struggle to keep up repayment, they will
refuse your application. Loans are useful if you need the money quickly and
without a deposit
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loan from finance company. These are the kinds of loan arranged by car-dealers
themselves. They have become increasingly popular in recent years. They include
showroom deals and personal contract purchases (PCPs). These are discussed
in full below.
First things first: cutting the costs
Before you start assessing your financial situation, it is important to take
some time out to investigate what mobility grants you might be entitled to.
In particular, you will want to see if you are eligible for:
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the Disabled Living Allowance (DLA) which has a mobility component
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the War Pensioners' Mobility Supplement which makes money available for
War Pensioners
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financial help from Motability. Motability is a registered charity and if
you cannot meet the full cost of putting a car on the road, Motability may
be able to provide support from its charitable fund. There is a waiting list
for this fund.
Click here for further information on Motability
Buying a car using credit
The most popular means of buying a car is with some kind of credit scheme. This
is basically a loan with a fixed rate of interest that allows you to pay back
the cost of the car over a set period of time. These credit schemes are offered
by a variety of finance companies, from banks, through car dealers to supermarkets.
The most frequent options are as follows:
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personal loan from a bank or building society. A personal loan won?t
require a deposit and it will pay out straight away, but remember to check
the level of the interest rate. One advantage of a personal loan is that you
will be able to shop around and possibly even negotiate discounts as a 'cash-buyer'.
Additionally you may be able to repay your loan early without penalty. Check
the loan terms and conditions with your lender
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deals from car showrooms. You organise payment of your vehicle at the showroom
where you buy the car. They will be able to tailor an agreement to suit your
needs: you?ll be able to decide the duration of the loan and how much
you wish to pay back each month. You will need to pay a minimum deposit and
you won?t own the vehicle until the end of the agreement. You will need
to pass credit checks made by the lender and if you fall behind on repayment,
your car may be repossessed
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personal contract purchase(PCP). These schemes, introduced in 1992,
offer a flexible form of hire purchase. When you get the vehicle, you pay
a deposit and agree to a set number of monthly repayments (usually over the
course of 2 or 3 years). At the end of the agreement, you have a number of
choices. You can keep the car by paying an agreed (and often low) amount for
it; start a new contract: you sell the old car ? usually through the
dealer ? and you keep any cash over what you paid which can be used to
finance your next deposit.; or walk away - hand the car back to the dealer.
The car must be in good condition and within the mileage specified in the
contract.
PCP schemes: further considerations
The great advantage of PCP schemes is that you never have to drive a vehicle
that?s more than three years old. This will be important if, for whatever
reason, you want to make as certain as possible that your vehicle is reliable.
Simply buy your first vehicle and when you?ve paid all your monthly contributions,
sell it on through the dealer and use any revenue made to finance the purchase
of a new car.
Despite the advantages, PCP schemes can be awkward if you want to make adaptations
to the vehicle. Any adaptations made to the vehicle have to be financed by you
and each time you get a new car, you will have to return the car in its original
condition. This is likely to be awkward if the adaptions required are fairly
major. Furthermore, there is often a maximum mileage stipulated in the contract
? not ideal if you are planning to travel.
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