Car finance options

Anyone that owns or has owned an unreliable old vehicle will know how stressful, frustrating, and even dangerous it can be to have to rely on this type of vehicle.

If you have decided that it is time to get rid of the old banger and invest in a newer and more reliable vehicle then there are a number of finance options available to you. The type of finance that will be best suited to you will depend on your budget and your circumstances. Some forms of finance can be more restricting than others, so this is something that you will also need to consider when deciding what sort of car finance options are best suited to you.

One form of finance open to those looking for a new car is HP (Hire Purchase) and this is known as one of the most straightforward means of purchasing a car, and is where you make monthly repayments on the car for a set period of time, after which time the car becomes your property. Another similar form of finance is PCP (Personal Contract Purchase) and this is where you make monthly repayments on the car and a balloon payment is deferred to the end of the term. Once the term comes to an end you can pay the balloon payment and keep the car, change the car for another vehicle and continue making repayments, or return the car to the dealership and pay nothing more.

A standard bank loan is another option open to those with good credit, and this is a far more flexible way of purchasing a car, as you can then purchase your vehicle from anywhere, whether trade or private. You can get some very good deals on standard unsecured bank loans if you have good credit, and this means that you can enjoy greater affordability when purchasing your vehicle. In addition, you can also take into account other costs such as insurance and tax and factor that into the amount that you borrow so that all costs are covered.

Some dealerships offer their own finance, and this is becoming more and more common in the bad credit sector. Those with poor credit are often unable to get other types of finance, and some dealerships now offer their own finance to bad credit consumers, albeit at very high rates of interest. This can be restrictive, as it means that you have to purchase your vehicle from that particular dealership. Some lenders also offer car specific loans but do stipulate which dealerships you are able to get your car from, although you still get to choose the type of vehicle providing that it is within the loan budget.

It is important to consider the different options available to you carefully before rushing into car finance. Remember, your credit rating can really affect the options open to you, and therefore you may find that your choice of vehicle and finance options is restricted if you have poor credit. Your income, outgoings, and employment status will also affect the options that are open to you. Make sure that you look at the pros and cons of each form of finance so that you can make a more informed decision with regards to which form of finance is right for you.

Tom Smith
1st November 2007

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