What’s The Best Way to Pay for a Car?

These days there are lots of different ways to pay for a car, which is excellent news for consumers who want access to flexibility and choice.

The trouble is, with so many options available it can be difficult to decide which is right for you. To help you make the right decision, we’ve put together a guide on the pros and cons of the different ways you can pay for a new vehicle.

Want to skip to the pros and cons of a specific payment option? Why not jump to:

Pros and cons of buying a car with cash

Buying a car with cash is a simple and traditional method, giving you full ownership right from the start.

While it requires a significant upfront investment, many buyers appreciate the financial freedom and peace of mind that comes from owning a vehicle outright.

Let's explore the advantages and drawbacks of this payment method:


  • Only one payment required
  • Possible access to better deals
  • Don’t need a credit check
  • No monthly payments
  • No interest

Paying for your car with cash is one of the most straightforward and easiest ways to buy a vehicle.

It involves making a one-off payment, and you own the vehicle outright. There are no limits on the car that you can buy like there are with some car finance lenders.

Cash payments also usually give access to a wider range of deals, as you are in a stronger position to negotiate a good price. 

There are no lender borrowing requirements and you also won’t need to worry about things like a credit check or getting refused for finance. 

No monthly payments are a major bonus of paying with cash, and you won’t need to pay any interest. Essentially, that means you will end up paying less for the vehicle overall.


  • Limited by your bank balance
  • Spending all your savings up-front

Using all your hard-earned savings to buy a car could also leave you with nothing to cover any emergencies that may crop up.

Another factor to consider is the price of the car. You’re limited to what you can spend by the amount of savings you have and that might not be enough to purchase the dream car that you really want or need.

If, however, you use finance, you could potentially afford a more expensive make and model thanks to the initial payment being lower. 

Pros and cons of car finance

With car finance, you are essentially borrowing to buy, paying off the vehicle in monthly installments. There’s Personal Contract Purchase where you have three options available at the end of the agreement term. You can pay a lump sum ‘balloon payment’ to own the vehicle at the end, trade it in for another vehicle or simply hand it back. Then there’s Hire Purchase (HP) agreements, which simply allow you to own the vehicle at the end of the agreement period once you’ve paid an ‘Option to Purchase’ fee.

Let's weigh the benefits against the pitfalls to help you understand if car finance fits your needs.


  • More choice
  • Fixed affordable monthly payments
  • Boosts your credit score

Using car finance to purchase your new vehicle provides excellent flexibility. It can make cars you otherwise wouldn’t be able to afford more attainable.

Saving up to buy a vehicle with cash can also take a long time, whereas you can get a car finance decision in under a minute.

Buying a car with finance can also help improve your credit score, provided you don’t miss any repayments. 

If you use Carmoola, you’ll benefit from flexible car finance where you have options to adapt the amount you pay each month depending on your financial situation.

As a result, you have more financial freedom and better control over your car payments.


  • Interest payments
  • Possible mileage clauses and additional charges for damages
  • Missed payments can hinder credit score
  • You don’t own the car until the end of your finance agreement

Using finance typically means paying interest, so the true cost would be more than if you bought the car outright.

There may also be clauses like mileage fees and additional charges for damages when you borrow from some lenders.

Failing to keep up with payments could negatively impact your credit score. 

Of course, you also don’t own the car outright from the beginning if you buy it with car finance.

In some cases, such as with PCP finance, you’ll also need to make a final balloon payment to own 100% of the vehicle.

More car finance guides

Pros and cons of getting a car subscription

The concept of a car subscription is a relatively new one, giving you an alternative to traditional ownership and leasing.

Offering a more flexible approach, car subscriptions can provide a hassle-free experience, but they're not without their disadvantages.

Let’s look at the pros and cons to see if this could be the right option for you:


  • All-inclusive package
  • Contract flexibility
  • Lower deposit

Car subscriptions typically provide an all-inclusive package with maintenance, service, roadside assistance, and car insurance added on.

They can last for anything between 6 and 24 months, offering plenty of flexibility. 

You’ll find this option especially handy if you’re struggling to find a deposit for a car, as typically deposits on subscription cars usually equal one month’s repayment of the car.


  • A lower deposit can mean higher monthly payments
  • Mileage cap
  • You don’t own the car
  • Unable to make car modifications

The downside to not paying a high deposit is you’ll end up with more expensive monthly fees, which is especially true if you go for a higher-end model.

There’s usually a millage cap for subscriptions too, and you’re bound by the terms and conditions set by the lender.

You don’t own the car, either. That means you can’t make any modifications, and you're essentially only paying for the use of the car.

Pros and cons of leasing a car

Leasing a car allows you to drive a new vehicle for a predetermined period, typically 2-4 years, at a fixed monthly payment. You won't technically own the car at any time throughout the lease period and will have to give it back to the leasing company at the end.

Let's weigh the advantages and disadvantages to help you understand if car leasing is a good fit for you.


  • Drive a new car every few years
  • Lower monthly payments
  • Typically includes maintenance
  • Tax benefits (business use)

As you’ll be leasing a brand new vehicle, you’ll always have access to the latest features and technology without worrying about resale value.

Compared to financing, especially for expensive cars, leases often have lower monthly payments due to the limited depreciation covered.

Many leases come with free or discounted scheduled maintenance, saving you money and hassle as everything is bundled together and managed as part of the agreement.

If you use the car for business purposes, you can even deduct a portion of your lease payments on your taxes.


  • Mileage restrictions
  • No ownership
  • Potential excess wear and tear charges
  • Limited flexibility

Leases have annual mileage limits, and exceeding them incurs fees. So you’ll need to consider your usage before taking out a lease and will need to keep an eye on your mileage throughout the agreement.

You don't have any equity in the car and can't sell it or customise it freely. Depending on the agreement you also might be charged for any damage exceeding normal wear and tear at the end of the lease.

If you decide the car or terms aren’t working for you, switching cars or canceling your agreement early usually comes with significant penalties.

Making the best decision for your dream car

There’s no right or wrong answer when it comes to deciding how to pay for your car. However, according to recent data from Statista, car financing is the most popular option.

More than two million cars were bought with finance between September 2021 and September 2022.

If you do decide to go down the hire purchase car finance route, check out the latest offers from Carmoola and find flexible options for your next vehicle! 👍


Is paying cash for a car a wise decision?

Paying cash for a car means no debt or interest payments, giving you full ownership immediately. While it can be financially sensible, make sure it doesn't drain your emergency savings.

What are the different car finance options available?

Car finance options include personal car loans, hire purchase (HP), personal contract purchase (PCP), and leasing. The best option depends on your financial situation, credit score, and how long you intend to keep the car.

How do car subscription services work, and are they worth it?

Car subscription services offer vehicles for a monthly fee, covering maintenance, insurance, and registration. It provides flexibility, as you can change cars or cancel without long-term commitments. However, long-term, it may be costlier than buying.

Which payment method suits my budget and lifestyle?

If you have ample savings and dislike debt, cash might be ideal. If you prefer smaller monthly payments and changing cars frequently, financing or subscriptions might be better. Evaluate your financial stability, driving habits, and car preferences to decide which option is right for you.

How do car finance options compare?

Personal car loans let you borrow money to buy the car, which you pay back with interest. Hire Purchase (HP) involves an initial deposit, followed by monthly payments, with ownership transferred after the final payment.

Personal Contract Purchase (PCP) has smaller monthly payments with a large final payment if you wish to keep the car, or you can return or trade it in. Leasing lets you rent the car for a set period, after which you return it without the option of ownership.

Each has its merits and costs, so it's essential to compare based on your priorities.