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What are your car finance choices?

When you buy a car, there are a number of car finance choices available. Review the following list, and decide what is the most suitable for you.

When you buy a car, there are a number of car finance choices available. Review the following list, and decide what is the most suitable for you.


•    Outright purchase
If you have savings available, outright purchase is a possibility that many people overlook. Weigh up whether your savings are earning more in interest than you would be paying out in charges to borrow the same amount. You may find that it is more cost efficient to buy the car with cash rather than using credit in the long term.


•    Unsecured car loan
An unsecured car loan is a widely available method of buying a vehicle. Log on to a specialist motoring website to get details and prices of a variety of car finance choices. This is an easy way of comparing the interest rates available, although you should bear in mind the length of term you choose for a loan. Your monthly repayments will often be lower for a loan with a longer term, but you will end up paying more interest over all.



•    Hire purchase
Hire purchase agreements may be quite affordable on a month to month basis. The car buyer is usually required to put down a deposit at the outset, and repays the outstanding capital and interest over a period of a couple of years in monthly instalments. However, an important feature of hire purchase agreements is the “hire” part of the transaction, because the car does not become the property of the buyer until the final instalment has been paid.


•    Personal contract plan
A personal contract plan may be an attractive option. The car buyer pays a deposit and then payments of interest and possibly part of the capital over a term of two or three years. The payment of the bulk of the capital (i.e. the purchase price) is deferred until the end of the term. This means that the buyer can either pay off the lump sum at the end of the term, or hand back the car and move on to something else.


•    Credit cards
Purchasing a car on a credit card can seem like the most tempting of all car finance choices, especially if you have a 0% rate available. But consider what you will do at the end of the 0% period. You may find yourself trapped on a higher rate than you would have got for an unsecured personal loan.

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