Is there a Buy Now Pay Later car finance option?

Need to get back behind the wheel urgently but can’t make your first payment right now?
 
It might sound like an impossible situation but, in fact, there is a type of car finance that could help you out.
 
Introducing Buy Now Pay Later – or BNPL for short.
 
It’s not available everywhere (it’s still kind of the new kid on the block) and it’s not right for everyone, but if you’re weighing up your car finance options, it’s certainly worth considering.
 
Intrigued? Let’s take a closer look:

What BNPL options are available and how do they work?

Put simply, BNPL lets you get behind the wheel of your new pride and joy without paying a penny – at least not upfront!
 
Instead, you’ll defer your first car finance payment for a set period of time, usually somewhere between one and six months.
 
Your delayed payment period will start as soon as you sign on the dotted line of your agreement and your first payment will be taken as soon as the deferment comes to an end.
 
It might be a good option for you if you could do with a little breathing space to get your finances in order, but you still need a car right now.
 
Keep in mind that if you plan to pay a deposit, it won’t usually be deferred and will be due on the date you officially sign for the car (or place the order for it).

What are the benefits and possible drawbacks?

The biggest pro of BNPL? Well, that would be time.
 
It’s the one luxury that money (usually) can’t buy, but with BNPL, you could get to enjoy a few months of freedom, driving your new wheels without the burden of a monthly car finance payment.
 
We know that having access to a car is often a necessity. Maybe you have to get the kids to school on time, commute to work without having to switch between three different buses, or help your loved ones get to their hospital appointments on time. Whatever the reason, a car is sometimes non-negotiable.
 
With BNPL, you can get the keys to a new (or used) model even if you don’t have the money to pay for it right now.
 
This payment option can be especially helpful at those pricey times of year, like Christmas or the summer holidays, when having to find the money to buy a new car is the last thing you want to be worrying about!  
 
That being said, every finance option has its downsides and BNPL is no exception.
 
It could run the risk of lulling you into a false sense of security. While lenders should carry out all the necessary affordability checks to make sure you aren’t taking on a payment that’ll put you under financial pressure, when you don’t have to make that payment for two, three, or four months, it’s all too easy to forget it exists.

It’s also important to note that it’s not the same as the Buy Now Pay Later options you’ll find on the High Street. Klarna, ClearPay, and PayPal Credit have all grown in popularity in recent years as they let you spread the cost of an item over time. The other big perk of these products is that you won’t typically face any interest or charges (unless you miss a payment!) Buy Now Pay Later car finance, on the other hand, will come with interest charges.
 
Once it kicks in, BNPL will elongate your loan term. Sure, it might just be a couple of extra months, but you could end up paying more in interest overall. You’ll also need to wait longer before you can sell, trade in, or modify your car if you bought it with a secured type of finance.
 
Finally, BNPL offers are often restricted to Hire Purchase (HP) loans, which could limit your options, especially if you were hoping to choose Personal Contract Purchase (PCP) for its flexibility and lower repayments.

What are the eligibility criteria for BNPL car finance?

Every BNPL lender can have different eligibility criteria but, generally speaking, to qualify you’ll need:

• To commit to an HP agreement
• To put down a large deposit upfront
• To have a good or excellent credit score
• To be able to comfortably afford your monthly repayment
• To be over 18 and have at least three years’ address history in the UK.

What other options are available?

Don’t think BNPL is right for you but still need to get back behind the wheel faster than we can spell supercalifragilisticexpialidocious? Well, we’ve got some interesting alternatives for you to consider which might be more appropriate:

Credit Card

Chip and pin? Yes, paying by credit card really is an option. Granted, not all dealers will accept credit card payments and you’ll be restricted by your credit limit, but if you have a 0% card then you could buy a new car with nothing to pay for at least 30 days. In fact, if you’d rather pay the full balance in a lump sum or make increasingly higher payments over time before the interest free period ends, you’re in complete control of how much you pay and when.

Personal Loan

If you can afford to make payments straight away but don’t have the funds to put down a deposit upfront, consider a personal loan. You’ll usually need a good credit score to qualify, and your monthly payments could be higher than other options, but you won’t need to pay a deposit. As the loan is unsecured, you can also sell or modify your new wheels whenever you like.

Borrow from friends or family

This alternative comes with one big caveat: sometimes money and relationships shouldn’t mix. You may have a generous friend or family member willing to lend you the cash to buy a car – and they might not even ask you to start paying them back for a while – but these types of arrangements can put a strain on your relationship. If you do want to try this route, getting the details down on paper and having a strict payment plan in place could help you manage the loan without falling out.