BUYING A CAR can be stressful.

You’re trying to choose the right model for your needs and your family’s needs. You’re hoping it will be reliable, hold its value, and come with a good history — or, if it’s new, that it won’t depreciate too quickly.

At the same time, there are more brands than ever to consider. The recent arrival of Chinese manufacturers such as BYD, Xpeng and Leapmotor has added even more choice. That’s good for competition, but it has also made the decision-making process more complicated.

Any notion that cars are a luxury in Ireland hasn’t been tested against daily life. Try relying solely on public transport outside the main cities and you quickly realise that, for most households, a car is a necessity.

So how are people paying for them?

According to the Banking and Payments Federation, in the third quarter of 2025, 20,954 car loans were issued, up 22.7% year-on-year. These loans totalled €267m, with the average car loan standing at €12,757.

Decades ago, buying a car was relatively straightforward. You either paid with money you had, or you took out a bank loan based on what the lender believed you could afford.

Today, the landscape is more complex. Many manufacturers now offer finance through their own in-house providers. Volkswagen Group Ireland, which accounts for roughly one in four new cars sold here through brands such as Volkswagen, Audi, Škoda, SEAT and CUPRA, saw around 31,000 customers finance their cars last year. About 60% opted for a personal contract plan (PCP).

PCP changed everything

Volkswagen introduced PCP to Ireland in 2010, and it fundamentally changed how many people buy cars.

The basic structure is simple. You pay a deposit, typically between 10 and 30%. You make monthly repayments over three years. At the end of the term, you can buy the car outright, return it, or refinance and use any equity as a deposit for your next vehicle.

Unlike hire-purchase, you are not paying off the full value of the car. Instead, you are covering the amount the lender expects it to depreciate over the contract period, minus your deposit.

For example, if you buy a €30,000 car that is expected to be worth €15,000 after three years, you repay the €15,000 difference over 36 months, plus interest.

Protection against the market

This projected value is known as the guaranteed minimum future value (GMFV). It varies depending on the model, engine and specification. One advantage of PCP is that it offers some protection if market values fall. If a car is worth less than its GMFV at the end of the contract, the finance provider absorbs the loss.

The main attraction, however, has always been lower monthly repayments. The trade-off is the sizeable “balloon” payment at the end if you want to own the car. Until that is paid, the vehicle belongs to the lender. Mileage limits apply, and the car must be returned in good condition.

PCP attracted criticism in its early years, largely because many buyers didn’t fully understand how it worked. Today, it is far better understood and remains extremely popular. That said, a recent wobble in used electric vehicle values — which has largely stabilised — has led to renewed interest in hire-purchase.

Hire-purchase is simpler. You choose a deposit and term, make fixed repayments with interest, and own the car outright at the end. Monthly payments are usually higher, but there is no balloon payment.

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Take the Volkswagen Polo. On hire-purchase, it costs €359 a month at 0.9% APR. On PCP, it’s a tempting €239 at 5.9%. But that lower payment comes with nearly €2,700 in interest and a €12,000 bill at the end.

Interest add up

All of this underlines the importance of understanding the full cost of finance. Interest rates, contract terms and final payments can make a substantial difference over time. Where and what you buy also matters. DoneDeal Cars now offers free history checks from Trusted Dealers, adding another layer of protection for buyers.

But common sense still applies. Very few cars are investments. Most will lose money. However, smart choices can minimise depreciation. Neutral colours such as grey, black and silver remain popular because they are easier to resell. Some brands retain value better than others.

Large luxury cars can lose huge sums quickly, while mainstream family models tend to be more resilient. Mileage matters too. High annual use often means changing cars more frequently, which adds to long-term costs. Bear this in mind, especially if you intend to spend your own money.

Ultimately, buying a car should not become a source of ongoing financial anxiety. With good research, realistic budgeting and a clear understanding of finance options, most buyers can find a solution that suits their needs without putting undue pressure on their finances.

A car should make life easier, not more stressful. And with the tools and information now available, there is little reason for it to be otherwise.

Paddy Comyn is the Head of Automotive Content and Communications with DoneDeal Cars. He has been involved in the Irish motor industry for more than 25 years.

Note: Journal Media Ltd has shareholders in common with DoneDeal Ltd