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Why You Should Never Buy a Car Outright


If you’re considering buying a new car, you will normally have two options: buying it all in one go with cash or applying for finance.

Many people will not be able to afford a new car in cash. But what if you have the cash available?

Should you use the cash instead of getting finance? Actually, this might not always be the best idea.

Why Pay in Cash?

The argument in favour of paying in cash is that you don’t have to pay any interest like you would when you finance your purchase. You will also own your car as soon as you part with your money, and you won’t have to wait until the end of any contract to become the owner.

However, despite these benefits, there are many other benefits that may make it more tempting to opt for car finance even if you can afford to buy your car outright.

Why Dealers Prefer Finance

Dealers often prefer arranging finance deals compared to accepting cash, and the reason is that their margins on sales are lower. They may make as little as a few hundred pounds on each sale, so they look for other ways to make more money. Providing the buyer with finance is one way they can do this.

Why Use Finance?

There are a number of reasons why buying your car using finance can be a good option for car buyers. Here are some of the key benefits to consider.

Access Incentives

When you buy a car on finance, you may find that the cost of the car is reduced because of the manufacturer’s deposit contribution. This can be upwards of £1,000, helping to reduce the overall cost of buying a car.

You may also be able to take advantage of low-interest rates, depending on your situation. This could be as low as 0% in some cases. This means you can spread out the cost of your car over many months without having to pay a large amount in interest overall.

Option to Settle Early

When you opt for an HP or PCP finance agreement, you may be able to contribute more in order to repay the loan earlier. However, the situation is different between HP and PCP agreements, and it also depends on the specifics of the lender.

Right to Voluntary Termination

With PCP and HP agreements, you can give the car back to the finance company after you have paid back 50% of the total cost in what is called Voluntary Termination (VT). This means you can give the car back even if it is worth less than the settlement figure you would have to pay. This can be useful if you are struggling to make your payments.

Protection Against Faults

PCP and HP deals also provide you with extra protection should your car develop a fault. In this case, the manufacturer and the finance provider are jointly liable.

You may also be able to get compensation from the Financial Ombudsman Service if you experience a problem with your car, which is something you cannot do if you buy your car in cash.

Cash or Credit? It’s Your Call

It’s always up to the individual when getting a new car. You may simply prefer to pay in cash, and if you have the cash available, that’s fine.

But always look at all the options. Don’t dismiss car financing just because you have the cash available, because it can actually provide you with several benefits that you would not be able to get if you were to buy your car with cash.

Marketing Director at Skyemotion Ltd
As marketing director, Paul is largely responsible for Carvine’s online presence and underwriting along FCA compliance.

At Carvine, we pride ourselves as a team of impartial vehicle finance experts that will direct you through the easy application process. As a result, our dedicated team put you in control of one of life’s biggest buying decisions. Consequently, we are all you need to finance your vehicle.

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Paul Thompson

1 comment

  • Some people, even after running through the numbers, would rather buy the car outright because they don’t like the feeling of having debt. This means you can spread out the cost of your car over many months without having to pay a large amount in interest overall.