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Buying a car after leaving the Motability Scheme: payment options and leasing a car

Buying a car after leaving the Scheme: payment options

For most of us, buying a car is a significant expense. Depending on your circumstances, you may be able to pay for it upfront, or you may choose to pay in instalments. There are advantages and disadvantages to each.

Paying upfront

There are benefits if you’re able to pay for the car upfront. You don’t have to commit to a repayment scheme and you won’t be charged any interest. The downside is the large initial outlay.

Paying in instalments

A more manageable option could be to pay for the car in monthly instalments. You can:

  • Request a loan for a car from a bank or building society
  • Use a finance option from your dealer – ask your dealer for information on the specific packages available

These are some important things to consider:

  • How much will you pay in total? Compare the cost of the car if you had bought it outright for cash with what you will pay overall at the end of the agreement.
  • What is the Annual Percentage Rate (APR)? All lenders must quote this by law. The lower this figure, the cheaper it will be to borrow the money.
  • What are the fees and penalties? For example, what’s the penalty for late or missed payments?
  • What is the repayment period? With a longer repayment period you pay less per month, but it can end up costing more. In the example below, you would pay £1,200 more for the 3 year repayment option. 
Option Monthly repayment Number of months Total
2-year repayment £250 24 £6,000
3-year repayment £200 36 £7,200

VAT exemption

If you buy a car that is extensively and permanently adapted for your wheelchair, and you are able to pay for the vehicle upfront, you may qualify for VAT exemption. For more information, contact HM Revenue and Customs National Advice ServiceOpens in new window on 0300 200 3700. leasing

Leasing a car after leaving the Scheme

As you’re used to leasing a car through the Motability Scheme, you might prefer the benefits of a personal contract hire agreement.

What is a personal contract hire agreement?

A personal contract hire agreement is a long term rental that usually includes maintenance. You will need to hand the car back at the end of the agreement.

What to think about when leasing a car

  • Before you sign up for a contract hire agreement you should confirm what is included in the package such as insurance , breakdown and maintenance .
  • If insurance is not included you need to make sure you get the car fully insured. You are still liable for the loan if the car is written off, so insurance is vital.
  • You should check whether there is a mileage limit or additional charges if the car is handed back in a poor condition.