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Choosing between New Car Finance options.

Offers of new car finance now come from just about everywhere - from the internet, the television and the newspapers, so it may be a little baffling picking what deal is right for you. Some may even go into a deal without a full understanding of what the different options are, so a little extra knowledge may be of use to anyone shopping for a new vehicle.

Offers of new car finance now come from just about everywhere - from the internet, the television and the newspapers, so it may be a little baffling picking what deal is right for you. Some may even go into a deal without a full understanding of what the different options are, so a little extra knowledge may be of use to anyone shopping for a new vehicle.

Some of the most common deals are;

•    hire purchase

•    zero per cent finance

•    leasing

•    personal contract plan

Hire purchase may be quite simple to set up and often has an interest rate starting at around seven per cent. However, it also typically involves paying a deposit on the car before the deal can be arranged and then set up so you pay back the rest in monthly payments.

This may be a practical and simple way of spreading the cost of your purchase but it may also typically mean that you don't actually own the car until the end of your hire purchase contract. Psychologically this may be a little concerning, as sometimes the vehicle may be repossessed if someone fails to keep up with repayments.

Another popular form of new car finance is a zero per cent finance. This may be available to people who can put down a particularly significant deposit - you may then be able to pay off the rest of in instalments at zero per cent interest. However, the size of the deposit may need to be as much as 40 per cent or more, and then the repayments might be significant too.

The above are just two basic descriptions of the types of deals are available, and one way of looking at a number of potential loans may be to use a specialist motoring website, many of which typically compare products for you based on your circumstances.

Leasing, on the other hand, is a way of getting the benefits of a car without actually owning it. You simply hire the vehicle long-term by paying monthly payments; typically you may be able to choose a vehicle yourself and simply say how long you want it for and how far you expect to drive it.

A personal contract plan may involve a deposit and monthly instalments as well, finally ending with a lump sum of cash to pay when the contract draws to a close. The amount of cash you defer to pay at the end, typically determined by the company themselves, is known as the minimum guaranteed future value.

In essence the company lending the cash provides a guarantee that the vehicle will be worth the amount that the contract ends. When the contract does draw to a close you can choose from paying the sum off and keeping the car, selling it privately to get the money to fund the last payment, and giving the car back to the dealership.

These are just a few examples of a new car finance, and all have their plus and minus points. Ultimately someone's individual circumstances may have the final say in what they go for, but thankfully there are a number of options for people who cannot fund a purchase outright themselves.

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