Car Finance or cash payment? September 18, 2019

When trying to fund the purchase of a new car, it can sometimes be difficult to know whether you should pay for it using a lump sum, or through some sort of car finance scheme. Both have their merits, and both have disadvantages. Let’s take a look at both sides of the argument now.

Choosing Cash Payment

Obviously, the biggest advantage of cash payment is that you are paying off the car in one go. This means that you own it outright from the moment you drive it away from the dealership, and also that you are not paying any interest on your purchase. The only additional payments you will have to make will be for road tax, insurance, fuel, and potentially a MOT if the car is old enough to warrant one.

The very obvious disadvantage of a cash payment of course is that you need to have all the money in the first place. Cars are not cheap, and it is rare that people have the liquid funds necessary to buy outright. And if your current vehicle becomes untenable very suddenly, you’re going to need to look at other options. Even those of you who might have a healthy amount of savings diligently squirreled away might want to consider if these funds are best saved for other things in your life that might not be as easily available on finance as a new car.

Car Finance

The main advantage of car finance then is obvious – flexibility. Regardless of whether you choose Hire Purchase or Personal Contract Purchase, the cost of your new car is spread out over time. With Hire Purchase of course, you don’t actually own the vehicle until you’ve finally finished paying it off. What’s more, while you won’t have to pay for wear and tear along the way, Hire Purchase can also be more expense on a monthly basis than the other finance option available to you.

Personal Contract Hire on the other hand is more like a mortgage – you are fully responsible for the car, but you also own it outright from start. When you consider that the monthly payments are also lower than with Hire Purchase, and that you can even go no deposit deals, it’s no wonder that PCP now accounts for over 80% of all new car registrations in the UK.


If you simply don’t have access to the funds needed to buy your car with cash, then there isn’t much to consider and financing is great option. If you are in the more fortunate position of being able to choose, then you simply need to ask yourself whether the funds you already have might be a valuable security net for later down the line, or simply better spent elsewhere when car finance is so easily available - even to people with bad credit.

Naturally, with finance you’ll pay interest over time, and so it comes down to your perception of that arrangement. For some, interest makes what is already a major life purchase a far greater expenditure than they feel is necessary. For others, this is merely the cost of the enormous freedom and flexibility that car finance can afford you.

If you decide finance is the right choice for you, we have a huge range of amazing no deposit car finance deals for you here at Car Finance Giant.

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