Financing a new car: which way is best for you?

Still relatively new in the UK market, and with variation among manufacturers’ schemes, a subscription takes elements of the PCH (personal contract hire), but gives it a more flexible twist. With Care by Volvo Flexible, for example, and shown below, the agreement covers the hire of a car, but with the option to walk away from the contract with three months’ notice. New customers also have a 30-day trial period at the start, during which they can hand the car back.

Apart from fuel and insurance, all running costs are covered, as is a reasonable level of wear and tear, and customers can opt for a particular mileage package, starting with the basic 6000 miles per year. (Again, our example is based on an annual mileage of 12,000.)

Since Care by Volvo is a rolling three-month contract, customers also have the option of swapping into a new/different model after that period, or simply retaining their existing car.

Car subscription advantages

  • All running costs covered, save for fuel and insurance.
  • Flexibility of withdrawing from contract with three months’ notice.
  • Low deposit.

Car subscription disadvantages

  • You never own the car,
  • Penalties for excess mileage and above-average wear and tear.

Example: Volvo XC40 1.5 T3 R-Design Auto (rolling 3-month contract, 12,000 annual mileage)

Monthly charge £589.00

Mileage surcharge/month £40.00

Total monthly payment £629.00*

Deposit (1 monthly payment) £629.00

*Minimum 3-month rolling contract

Personal Loan

Taking out a personal loan to cover some or all of the cost of a new car is one of the most straightforward methods of finance. You choose the lender, the best rate of interest available, and the period over which you’d like to repay the loan. You then effectively become a ‘cash buyer’, and the car belongs to you immediately, with no limits to how long you keep it, use it, or even modify it (although your insurers will need to know if you’re planning any upgrades).

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