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Hire Purchase (HP) HP is where a deposit is followed by regular monthly repayment. However,
car is owned by finance company until loan is repaid. So, if you fail to maintain finance payments you could lose vehicle.
Hire Purchase is fairly easy to obtain and widely available, and with it you also get additional protection under Consumer Credit Act
Personal Loan (as opposed to Manufacturer’s finance) A personal loan is probably cheapest way to buy a new or used car as personal loan providers tend to offer lower interest rates than traditional other car financing methods. Also, as you are classed as a ‘cash purchaser’ (because you already have finance in place) you are in a strong position to negotiate a good deal.
As loan will not be secured on vehicle, car is owned outright by you.
Manufacturers schemes These are offered by manufacturers, dealers, finance companies and some banks for purchase of new or nearly new cars. More often than not, you will be paying interest at a higher interest rate than that offered on a personal loan. With manufacturers schemes, you can part exchange your own vehicle and may also need to make a deposit. You will then have a finance agreement for remainder of cost of vehicle. As with HP, if you do fail to keep up repayments on vehicle, it may be repossessed.
Personal Contract Purchase (PCP) PCP schemes available from car dealers as well as banks. You pay a small deposit and a set amount of monthly payments. When contract ends, you have three options:
• you can hand car back and owe nothing, • you can pay balance (which, in any contract you sign, will be stated as Minimum Guaranteed Future Value) and keep car, • you can trade it in for another, and begin a new PCP.
PCPs are best for people who like a new car every two or three years. If you are looking to keep a car long term, then personal or hire-purchase loans will be cheaper.
By now you should have a good idea of where to buy your car from and how to finance your purchase. Here are…
Ten top tips on what to do when buying …
…. from a car dealer or broker
• Do your research first – get a good idea of what car you want and how much you are prepared for pay for it and stick to price • When salesman asks you what your budget is, always come in at least £500 under what you are really prepared to pay. Salesmen will always add £500 on top of your budget because by time you are sitting down and talking about figures with him or her, it is obvious you really want car and will find a way to finance ‘extra’ £500 • If you are part exchanging your vehicle, check out it’s value somewhere like Parkers Price guide. While you will never get 100% market value on your p/x from a dealer, at least you have a rough figure as to what it should be. • Always be confident, polite, but firm. You are likely to get a better deal if you come across as someone who won’t be messed about with! • Consider buying an ex-demo. These are normally no older than three months’ old, but you can expect to get up to 15% off new price!
….. privately • Always take someone with you to give a second opinion – two pairs of eyes are better than one and go during broad daylight so that any scrapes or dents will show up • Always meet seller at their house so you can check they are genuine and that all documentation tallies up • Test drive car and listen out for any noises, as well to check that there are no ‘blind spots’ and that car feels comfortable • If you feel car is right for you, arrange to have an independent survey carried out by one of motoring organisations. This will highlight any flaws or potential problems. • Always be confident, polite, but firm. You are likely to get a better deal if you come across as someone who won’t be messed about with!
Motor Car Loans an automotive resource guide for those looking to buy, insure , sell or in fact do all most anything with a car. Sign up to our free car insurance course, send an email to motorcarloans@getresponse.com
