CAR FINANCE

Financing the purchase of a car can be confusing, with such a wide range of car finance options available to you. Do you get a personal loan or do you go with a manufacturer's deal and part-exchange your current vehicle?

Here we highlight the most common ways that car finance is raised:

1. Hire Purchase

This option is offered on new and used cars by dealers and can be fairly easy to arrange. However, you do not own the car until the final payment, which means you cannot sell it until you have settled up your loan.

Interest rates vary, but can be competitive against bank loans.

2. Remortgage

While you may spend the next 20-odd years paying for your car, remortgaging is still the cheapest way to borrow (unless you get interest-free finance – see below). If you are a homeowner, most mortgage companies will allow you to borrow more for other things like car purchase.

3. Interest–free Finance

Available from car dealers, interest-free finance is normally for brand new cars only. However, these can be a great way of getting a new car without paying interest on any finance. However, getting interest–free finance and a discount at the same time can be hard – so it may pay to haggle hard on the price of the car and borrow elsewhere.

4. Personal Contract Purchase

Monthly payments from your bank account are spread out over a pre-defined period (normally 2 – 4 years). At the end of the period, you either make a lump sum payment to purchase the car outright, or you hand it back.

5. Personal Loan

A personal loan can be arranged separately from the purchase of a car, meaning that in the eyes of a dealer, you are a ‘cash’ buyer. Personal loans can be arranged via banks, building societies and finance houses.

6. Car Loan

This is another name for a personal loan, although you may get additional benefits such as payment "holidays" or a free car inspection prior to purchase.

Car Buying and Car Insurance Articles
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