Right Deal For a Car Loan

The majority of drivers need to take out some form of loan to buy a car but there are many packages out there and it can be very daunting making the right choice. Car dealers have had to come up with their own attractive deals to fight off the strong competition. They offer Personal Contract Purchase (PCP), the latest trend, and, Hire Purchase (HP) to compete with the opposition.

As with most loans it is the Annual Percentage Rate (APR) that needs looking at as it will include set up charges and the interest to be paid. It will not include the cost of protecting the payments if for any reason you are unable to pay. When you get your quote the total amount payable is the important figure and all quotes must state an APR.

Most people favour HP to buy their car and it is straight forward. It is similar to taking a personal loan but may have a lower interest rate. The total cost including the car, the interest and any other charges are added up and divided by the term of the loan, which can be from 12 – 48 months – but is commonly 36 months.

For most HP deals you may have to put down a 10% deposit or a part exchange and once the deal is agreed the car becomes yours once the final payment is made. During the term of the loan the car is the security against payment default. If you don’t pay you lose the car.

A Personal Loan.

You don’t need to be a mathematician to get to grips with a personal loan and there are a great many of them out there on the market. Although not fully paid for the car is your property once the agreement is made and payment default will rest with you. Usually you can borrow anywhere from £500 up to £15,000 and loan terms can be from 1 up to 5 years.

Banks, building societies and supermarkets all offer personal loans and it is always worth shopping around and checking out latest deals. Rates change regularly and may vary from 7.9% to 27% depending on your credit score, the length of the loan and the amount to be borrowed. Generally, if the loan is quite low the APR will be higher.

Choose the Best package

When you buy a car you need to consider all other costs too and consider any benefits that you might want for security, for example warranties. You must also consider how long you intend to keep the car and then there is insurance for it. Try to be realistic about what you can afford and stick to a planned budget and know exactly how much you can spend.

If you agree to a HP or a PCP you will need to place a deposit and there are always charges for credit deals that must be factored in. It also might be advisable to take out payment protection and add it in to the monthly installment.