Does Everyone Get a Loan to Buy Their Car?

Do you need to get a loan to buy a car? Not at all. If you have more than enough money to buy a car with cash, you can do so. But for many car buyers, it’s a huge purchase that can use up most of their savings. That’s why people who want to buy cars usually get car financing

Can I Buy a Car with Cash?

If you have sufficient funds to buy a car and still have some left for insurance, taxes, registration, and other expenses, then go for it! Buying a car with cash is the simplest and cheapest way to make the purchase. 

When you choose this option, the car is immediately yours once you make the payment at the dealership. With car finance agreements, the car isn’t yours until you pay the final amount. So, if you don’t like waiting for the car to be completely yours or thinking about monthly payments, paying with cash is a great option. 

One of the advantages of buying a car with cash is that you can modify the vehicle any way you want. Since it is yours, you can do anything you want with it. If you ever want to sell the car, you can also do that. These things are not possible for cars on finance. 

Can I Buy a Car Through a Personal Loan?

For car buyers with excellent credit scores, another option is to get a personal loan to buy the car. Assess your credit rating and check your standing. If you have a prime or super-prime credit status, you can apply for a personal loan from banks and other financial institutions. 

With a personal loan, you can have a contract of one to seven years. It would be better for you if you can choose a short-term contract so that you don’t have to pay so much interest. Also, don’t secure the loan against your property. If you fail to make payments, then your home could be at risk. 

Buying a car through a personal loan is almost the same as buying a car with cash because you’ll be the owner of the car from the start. You can modify it, sell it, or trade it. Next to buying with cash, a personal loan is also a cheap option to buy a car. 

What is a Hire Purchase Deal?

Now, let’s talk about car finance. The first one we’ll discuss is called Hire Purchase. With this arrangement, you only have to pay about 10% to 20% of the car’s total value. The rest can be spread over a certain period through monthly payments. 

The car won’t be yours until you’ve paid the last payment to the car finance company. Until such time, the lender owns the car so you can do any changes to it or sell it. If you’re sure about the car you want to buy and want to keep it for a good number of years, Hire Purchase is a good deal. 

What is a Personal Contract Purchase?

Another car finance arrangement is Personal Contract Purchase. It’s almost the same as Hire Purchase but you have more options with this deal. You would also have to pay a deposit and then pay the remaining balance through monthly payments. 

Also, the owner of the vehicle would be the car finance company until such time that you’ve decided that you want to own the car and pay the final balloon payment. When your contract ends, you have the option to return the vehicle or buy it. 

If you don’t want to buy it, you can simply hand it back to the lender. But be sure that it isn’t damaged and that you haven’t exceeded the agreed mileage limits. If you want to own that car, then you have to pay a final payment. These details are all in your contract so be sure to read them thoroughly and ask the lender any questions you may have about the deal. 

What is Car Leasing?

What if you’re not sure about owning a car? You don’t have to make a commitment like entering into a Hire Purchase agreement if you’re not sure yet. You can lease a car for a couple of years if you like. 

Car leasing works a lot like Hire Purchase and Personal Contract Purchase. You’re still going to make a deposit as well as monthly payments. However, with this car finance deal, the car will never be yours. It’s like renting a car for the long term. But by the end of your contract, you have to return it to the car finance company. 

How Do I Choose?

The best car finance deal depends on your finances and your personal preference. If you have enough cash in your bank account, buying a car with cash is straightforward, simple, and easy. You can apply for a Personal Loan if you have an excellent credit score. With these two options, you’re the owner of the car from the start, as soon as you’ve made the payment. 

If you would rather spread the cost of the car through monthly payments, then Hire Purchase is a good option, especially if you’re sure that you want to own the car for a long time. But if you’re not yet sure about owning a car but would like to enjoy the freedom and flexibility that comes with having a car, then Personal Contract Purchase or Car Leasing are options you can consider. 


There are several ways that you can buy a car. Choose one that best suit your financial situation and personal preferences. Also, make sure to shop around for the best car finance companies in the UK so that you’ll get great deals.

Don’t be in a hurry to sign a contract. Take your time so you can review every detail of the agreement. Once you’ve chosen a lender, prepare well for your car finance application. Soon enough, you’ll be driving home your dream car!