The Cheapest Ways to Own a Car in the UK

What is the cheapest way to own a car in the UK?

We live in expensive times, and most of us are trying to save money where we can. Buying a new car is an expense that requires careful consideration, especially if you are trying to make sure your new car investment is a sound economic investment. 

In this article, we look at the cheapest way to own a car in 2022.

Buying a car with cash

The cheapest way to purchase a car outright is, unsurprisingly, cash. A straight cash transaction with no ties, no interest, nothing. The car is 100% yours as soon as you have it over your card.

But notice the emphasis on the word purchase. When you start looking at the monthly and lifetime ownership costs of the car, things start to change. 

Car ownership is an expensive business, and the initial car cost is only one factor in the lifetime cost of any vehicle. The monthly costs of your new or used car must be carefully considered, including tax, fuel, servicing and maintenance, car insurance, and depreciation.

When you buy a used car with cash, few car dealerships are going to offer you incentives like a reduction in servicing and maintenance costs, a tank of fuel, temporary car insurance, free gap insurance, or other ways to save money on running costs; it's rarely in their interest to do so.

You may also miss out on:

• The guaranteed minimum future value on your new car offered by the finance company
• A range of flexible car finance product options designed to suit your situation
• A competitive fixed interest rate that allows you to buy a new or used car through a personal contract purchase, hire purchase agreement, or personal contract hire agreement, keeping most of your cash in your pocket without overspending on interest
• Temporary car insurance while you make the switch from your previous car

Personal contract purchase (PCP)

Personal contract purchase is a flexible contract purchase agreement that allows you to purchase a new or used car with a small deposit, or sometimes no deposit at all, and pay manageable monthly payments to your finance company until the end of the agreement. When you take out your PCP agreement you'll be offered competitive fixed interest rates, fixed monthly payments, and a guaranteed minimum value for your car, which is the guaranteed minimum amount the car will be worth to the finance company at the end of the agreement.

When that time comes you will have a number of options:

• Pay the GMFV and own the car outright
• Hand the car back with no future commitment
• Part exchange the car for a new car, using the GMFV as the deposit

PCP agreements are one of the cheapest ways to own a car with the security of knowing what the car will be worth at the end of the agreement and with a number of options to choose from when you get there.

Hire purchase agreement (HP)

A hire purchase agreement is slightly different from a PCP in that you will pay a deposit of up to 10% upfront. This is followed by fixed monthly payments which are paid until the end of the agreement, at which point you will own the car outright.

As the GMFV included in a PCP is not available on HP because you will own the new car at the end, not have the option to part exchange or return it, HP monthly payments are usually higher than those of a PCP deal, but this will depend on the deposit you put down when you buy the car.

Personal contract hire

Personal contract hire agreements are designed for drivers who do not want to own their new car but prefer to hire it for a set amount of time. They are not a form of car finance as such. There is only a small deposit to be paid, followed by monthly payments which include car insurance, servicing, maintenance and tax if you so wish. You will not own the car at any point, it remains under the ownership of the dealership. At the end of the agreement, the car is handed back to the dealership. This form of car hire is usually more expensive than an HP or PCP deal, and you will not have the option to buy the car at the end of the agreement.

Personal loans

If you wish to buy a new or used car outright you could look at the interest rates available on a personal loan at the time. Taking out a personal loan requires serious thought and without gap insurance or a GMFV offered through PCP agreements, you may find yourself owing more than the car will sell for, leaving you in deficit on personal loan repayments.

If you are considering personal loans for your new car purchase, be sure to speak to the finance manager at your car dealership to see what other options are available to you.

Cheap ways to buy a used car with DCC

We hope this article has helped you understand car payments and monthly costs associated with buying a new or used car, and your options for the cheapest way to buy a car in the UK.

If you have any concerns about being able to afford your new or used car finance speak to your finance provider or a money advice service for advice and support.

View DCC's current stocklist of used cars or speak to a member of our team today to find out more about cost-effective ways to buy a car.