Auto Loan

A personal auto loan is the most common way of borrowing money for the purchase of a new car. Well over 25% of buyers take out this type of auto loan whether they are planning to trade in or trade up to something new or newer.

our best loans
loan provider typical APR max loan term range 1 Sterling Credit 7.6% £75,000 3-25 yrs 2 First Plus 7.9% £100,000 5-25 yrs 3 Picture 8.4% £100,000 10-25 yrs 4 Nemo 10.9% £100,000 5-25 yrs 5 Paragon 11.3% £150,000 5-25 yrs

It can be appealing to get finance from a dealership because it appears quick and easy. However, when compared to an auto loan, a Hire Purchase (HP) deal has some serious drawback:

• A HP deal is not always flexible - you usually cannot sell the vehicle until the loan is repaid, if you do you will face hefty fines.
• The HP provider owns the car until you have made your last payment. If you default on your payments the HP provider can reclaim the vehicle.
• The monthly payments on a HP deal for an auto loan may look lower but the average dealer finance interest rate is 12.9% after adding in all the costs.

Through websites like Myloanchoices, you can now get a separate auto loan online from less than 6% so it is must cheaper than a dealership. A HP deal maybe easier to open but it is more expensive. You have the flexibility to sell the car when you want, even before you have finished paying your auto loan.

The deposit is what makes the difference. Take, for example, a Audi A4 costing £15,000 brand new. With a 30% deposit (£3,000) the monthly payments on a HP deal at 12.9% APR over 5 years would be £268, with the total payable being £16,087. If however you borrow £15,000 on a separate auto loan you would be paying £288 per month over 5 years (6.0% APR). This makes the £268 look very respectable.

Take a moment to think about it though. Because the deposit is £3,000 you are actually only borrowing £12,000 with the HP deal – if you took out a separate auto loan for £12,000 the monthly payment at 6% over 5 years would be only £231 with the total payable being £13,867. The HP deal looks attractive only because of the way it is presented – you can save money with a separate auto loan, in this case £2,220!

There is another big advantage of taking out a separate auto loan, in that it makes you a cash buyer. The lender will give you the money before you buy the car and hence you can use the cash to haggle over the price.

The message is clear – shop around for the best auto loan and get your finances sorted out before you hit the showroom.

Scroll to the top of the page to view the best auto loan products provided by Myloanchoices.