Buying a car? Your finance options explained…

With the New Year just around the corner, many motorists are looking to upgrade their car and acquire one of those alluring new ‘141’ or ‘142’ plates.

Traditionally more than half of all new cars are sold in the first three months of the year. However, the introduction of the new dual registration plates has resulted in a more even distribution of sales throughout the year. Sales of new cars are expected to reach the 74k mark this year; this figure would have been lower at circa 67k without the introduction of the ‘132’ plate, according to the SIMI.

Car dealers are now gearing up for the New Year and with a forecast for economic growth next year, the industry is already offering customers deals on '141’ cars. Many dealers are reporting good volumes of pre-sales already in place for January.

Buying a car is regarded as the second most important purchasing decision in our lives after a home, so it is important to spend time choosing the right type of car for one’s needs. Individual car brand websites will show features of each model and specialist car magazines and websites are also a good source of information. However, customers should be aware that they are not protected by industry regulations when buying privately - either person to person, via classified adverts in magazines or online on websites. Car dealers are an excellent source of information and offer test drives which is vital in ensuring the car is suitable for one’s needs. They all offer very competitive finance options and can arrange a trade-in of your current vehicle.

Tom Forde, manager at Bank of Ireland Galway Industrial Estate, says: “There are two main types of car finance available when purchasing a car – an unsecured personal car loan or dealership finance such as hire purchase and personal contract plans. Car loans are more suited for people buying used cars or when purchasing privately and Bank of Ireland offers a choice of fixed or variable rates and there are no hidden fees. By choosing this type of finance you would own the car from the outset, allowing you the option to sell the car whenever you like.

“We also offer customers a secured hire purchase option at a competitive fixed rate giving you peace of mind knowing your repayments will not change throughout the term of your agreement. At the end of your agreement and on payment of a small purchase fee, the car belongs to you. Secured finance is suitable for cars being purchased over €7,000 from a recognised dealer in the ROI. This is becoming an increasingly popular option for new car purchases with Irish consumers and recent years have seen increased competition and great value emerge on the forecourts. In most cases a minimum deposit (cash or trade-in ) is required and there may be documentation fees. With this finance option customers do not own the car until the end of the agreement.”

For car buyers who would like to drive a new car every three years a Personal Contract Purchase Plan (PCP ) is also becoming more popular in the Irish market. At its simplest this product is a hire purchase product, but from the outset the dealer puts a price on what the car will be worth at the end of the agreement; this is called the Guaranteed Minimum Future Value (GMFV ). This amount is then taken away from the finance amount required and the monthly payments are then based on that ‘difference’ which means lower monthly payments for the customer. At the end of the agreement, the customer then has three options; to hand back the car, trade in and use the equity for a new car or to pay off the GMFV. Bank of Ireland through Bank of Ireland Finance has established relationships with 14 motor franchises and offer a variety of options from low APR programmes to specific Personal Contract Purchase plans (PCP ).

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