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Car credit – Getting the right deal for you.

When buying a new or second hand car the fun part is going out there and finding the vehicle most suitable for you and there are many ways that you could do this. You have the option of searching online for a second hand car, buying privately from a friend or through one of the free ads papers or you can go around car dealerships.

When buying a new or second hand car the fun part is going out there and finding the vehicle most suitable for you and there are many ways that you could do this. You have the option of searching online for a second hand car, buying privately from a friend or through one of the free ads papers or you can go around car dealerships. There is however another aspect to consider when looking for a new car and that is how you are going to finance it? There are not many individuals who are lucky enough to be able to pay cash outright and so have to consider a means of credit. So when looking for car credit what options are available? Here are the two most common:


The personal loan


The personal loan could be used whether you are buying from the showroom or you are buying from a private dealer. There are advantages and disadvantages to taking on a personal loan so we will look at both.


•    Advantage – you will have cash in your hand so you could walk into the showroom and haggle with the salesman to get something knocked off for paying in cash.
•    Advantage – you could spread out the cost of the loan over several years to keep down the cost of the monthly repayments.
•    Disadvantage – should you pay off the loan early then you may have to pay a substantial amount out in a lump sum as part of the loan’s early redemption clause. This will typically be a few months’ interest.
•    Disadvantage – to get the lowest interest rates your credit rating will have to be excellent.


Hire purchase aka HP


Hire purchase could be taken if you are buying your car from a dealership but again there are advantaged and disadvantages.
•    Advantage – if you can afford to pay a large deposit on the car in the showroom then you could get access to a 0% interest deal which of course could work out in your favour depending on how much you have to lay out.
•    Advantage – this can be one of the easiest ways to get a car loan and the loan is done there and then in the showroom.
•    Disadvantage – you might not have the money for the initial deposit which could be at least 10% of the value of the car.
•    Disadvantage – the car is not yours until you have paid the final instalment which means that if say you have taken out the loan over 6 years but find you want to sell and get another car in 3 years you cannot.


Before rushing into taking out any type of car credit you might want to go over the options very carefully so you fully understand what you are getting yourself into before signing.

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