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Financing A Car
When choosing and purchasing a car it is important to take the longer term financial implications into consideration, rather than concentrating solely on the initial cost. There are two main ways in which to finance your purchase - Hire purchase or a personal loan - each of these offers different benefits and fulfills the needs of different types of buyer.
For the less well-off, Hire purchase (HP) is the more attractive option as it allows the buyer to effectively purchase a car in installments with a relatively low initial down-payment. Generally a HP agreement begins with a deposit, usually small, monthly payments then follow; a period of somewhere between two and five years with a larger final payment, or payment option, is typical.
The more affluent buyer may prefer the option of a personal loan, or even a specific car loan, although these are becoming less common. Some banks and building societies, alongside the AA, offer car loans with extras such as free MoT testing or roadside assistance, but with the plethora of lenders out there it is worth shopping around for the best rate for you.
When choosing a loan, compare both APR and insurance rates to get a clearer picture of what you may be paying; loans direct from the dealership where the car is purchased can prove to be costly as they can have very high APRs.
One other option is a personal contract purchase scheme, or PCP, which works in a similar way to HP but with the key difference that, aside from being somewhat cheaper, the final payment is based on the lender's predicted value of the car in the future.
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