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What is car credit?

Car credit is a way of paying for the purchase of a car which could be either brand new off the forecourts or bought second hand from a dealership or privately. Unless you are one of the very lucky ones that can afford to lay out cash for the purchase then you will have no option but to look at some form or car credit, other than borrowing from a friend or relative, to pay for the vehicle. There are many different ways that you could look into to find the money and some could be more suitable to

Car credit is a way of paying for the purchase of a car which could be either brand new off the forecourts or bought second hand from a dealership or privately. Unless you are one of the very lucky ones that can afford to lay out cash for the purchase then you will have no option but to look at some form or car credit, other than borrowing from a friend or relative, to pay for the vehicle. There are many different ways that you could look into to find the money and some could be more suitable to your circumstances than others.


There are basically two different types of car finance. One relates to buying your car through a dealer and the other independently. Therefore your choice of car finance will be based on this.


If you are looking to finance an independent deal, say when buying second hand through website advertisements or free ads newspapers, then you may wish to consider taking out a personal loan.


You could apply for a personal loan with a low rate of interest for the amount you need to borrow and then pay this back over a period of time. Usually this will be somewhere between 1 and 4 years, however the longer you borrow over then the more the car will cost in the long run with the interest repayments.


Should you be buying from a dealership then you could also take out a car loan or you could consider another option which is taking the hire purchase deal usually available through dealerships. Hire purchase (or HP as it is often known) is a loan given through the dealership which means you do not have to search around for car credit yourself. You will pay a deposit on the car and then repay the remainder of the money over a certain amount of time. You could spread the loan out longer to keep your repayments down each month but you will need to consider that the car will not be yours until you had paid off the loan entirely.


You should also note that borrowing this way could mean that you pay out more in interest. This is because the dealership will typically add a bit on top of the interest charge to make a profit.


So when looking for car credit, do review all your options and compare terms, conditions and rates very carefully, so you know what you are signing up for and just how much your loan will cost.

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Back to July 2009

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