As obsessions go, cars are one of the most expensive ones you can have. If you want to fork out for the new BMW i4 or the Mercedes C-Class, you’ll need some fairly deep pockets. Whatever model you opt for, choosing the right method of finance is crucial. A quality vehicle is priceless, but you still don’t want to be paying the price in years to come when you can’t even afford to put fuel in the tank.

It goes without saying that you should have a fair bit of money saved up before you even think about driving a new car out of the lot, but the way you pay for it can make a big difference to your financial situation. If you’re smart about payment and make the right choices, you will be making your life a lot easier for yourself.

To help you make your decision, here are a few options for financing your next car.

Personal Loan

If you have a good credit rating, a good option is to take out a personal loan with your bank or building society. You can make your payments a lot more manageable by spreading them out over a period of up to 7 years. Just make sure you shop around to find a favourable interest rate. This is usually the cheapest alternative to paying for your car outright, and it can be easily arranged over the phone or online. But be warned, taking out a personal loan might affect your ability to take out a loan for something else if needed.

Logbook Loan

A logbook loan is a loan that is secured against your vehicle, so until you pay the loan back fully, the lender will retain ownership of the car. The maximum value of the loan will depend on the trade value of the vehicle, but you can usually take out between £500 and £100,000. Borrowing in this way allows you to get a better interest rate than through other forms of credit. However, logbook loans can be more expensive and you risk losing your vehicle if you can’t make the repayments.

Leasing

Another option for financing your car is simply to lease it. This means you won’t technically own the vehicle at any point, but you can keep it for as long as you wish. All you need to do is pay the dealer a fixed amount each month, which will include costs for servicing and maintenance. At the end of your agreement, you can either choose to renew or hand the car back to the dealership. This form of financing can work out more expensive per month than other options, but it does mean you have more freedom, and you can return the car if you aren’t getting on with it. It can also work out cheaper in some cases as you won’t have to pay any extra if it needs any work done. 

Each financing option has its individual pros and cons, so it’s worth taking some time to do your research before making a decision.