Many of us dream of being able to drive a brand new car out of the forecourt. No previous damage. No worries about reliability. That new car smell!
Unfortunately, new cars today are very expensive – almost $48,000 on average. Even if you choose to buy a new car on finance, you’re likely to pay huge monthly payments. While new cars are more fuel-efficient and won’t need as many repairs, this still doesn’t make up for the high cost of purchasing them.
Fortunately, there are some alternative funding options to consider that can make a new car more affordable. From leasing to rebates, here are 5 solutions that could be worth looking into if you have your heart set on a brand new model.
Opt to lease
Leasing is a way of essentially renting a car. Not owning it means that you cannot modify it or sell it – plus, there may be mileage restrictions you have to stick to. However, you’ll be able to access cars that would otherwise be impossible to fund through finance.
You can find lease deals on new Cadillacs and lease deals on new BMWs with attractively low monthly payments. Maintenance is sometimes covered by a warranty, plus there are tax deductions for business owners.
Most leases last 2 to 3 years. After this you must return the vehicle, after which you’ll be given the choice to lease a new vehicle. Some dealerships allow you to buy a leased car at the end of your term, but you’ll have to buy it for its current value – your previous lease payments won’t contribute towards it.
Consider PCP finance
PCP finance is a unique type of finance that can be another means of affording a new car. With this option, you pay smaller monthly payments than you would with a traditional hire purchase finance agreement. At the end of the agreed period, you then have the option to pay the remaining value of the car in a single payment (known as a balloon payment).
The average balloon payment is usually equal to 30% to 50% of the car’s value. If you pay this, you keep the car. If you cannot pay this, you must return the car to the dealer. However, you do have the option to then take out a new PCP plan on a new vehicle.
Essentially, it’s like a happy medium between leasing and finance. As with leasing, there may be some restrictions until you’ve paid the balloon payment.
Take out a long-term car loan
Most car loans are 3 to 5 years in length. However, it is possible to take out 10 year car loans.
These loans come with much lower monthly payments because they are stretched over a longer period. This makes it possible to buy a newer car and pay less each month.
You will pay more interest in the long run, plus you are committed to a loan for a much longer period. On top of this, credit checks may be stricter than standard car loans due to the length of the loan. These loans are also much harder to find and some lenders won’t offer them.
Compare cheaper new cars
Not all new cars cost over $40k. Many new cars cost under $30k, while the likes of the Nissan Versa costs only $18,330 to buy.
Such cars may be easier to fund with finance, because monthly payments won’t be as high. Yes, these cars are likely to be more basic than other newer models and may not have the same gadgets. But you still get to drive away in a shiny new car.
Explore new car rebates
Some dealerships will offer discounts on new cars known as ‘rebates’ for certain limited periods. This is usually just before a new model is about to come out. This can bring down the cost of a new car.
If you’re buying an EV such as a Tesla or BYD car, you may even be entitled to tax credits of up to $7500 – although Trump has recently axed this, so you don’t have long to take advantage of it.
Conclusion
If you’re willing to not go down the traditional finance route, there are many alternative funding methods you can use to afford a new car. Choosing a cheaper model and looking into rebates could further help to put a new car within reach. It all depends on what type of car you’re looking for as to how much money you can reasonably save.
