Buying a car: What is the best way to pay for it?

If you intend to purchase a new vehicle, figuring out how to pay for it is crucial

New car sales may be on the decline but, for those who do intend to purchase over the coming year, figuring out how to finance the deal is crucial. If you’re in the market for a 192 model, or even a second-hand 2016 or 2018 car, what do you need to know about your various financing options before you take the plunge?

Cash

The cheapest way to pay for a car, be it new or otherwise, is to pay for it from your own funds. Historically, this may have been less attractive for some people, given that it means giving up a portion of their savings which they may rather hold onto for reasons of financial security and that all-important “rainy day” fund. These days however, the opportunity cost of putting your money into your car is less obvious; after all, the “real” value of your money is likely falling if you’re only earning a return of about 0.1-0.3 per cent on it on deposit. So paying for a car with your deposits can make sense.

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