Buying a car

Buying a car is a complex business that you need to take time over. In particular, it is vital that you find the best way to finance buying a car.

Personal loans are now the most popular way to borrow money for buying a car. Over 25% of buyers take out this type of loan for buying a car regardless of whether they are trading in or trading 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

Getting finance from a dealership is often very appealing when buying a car because it is quick and easy. However, a Hire Purchase (HP) deal has some serious drawbacks compared to a personal loan:

• A HP deal is not flexible - you cannot sell the vehicle on until the loan is repaid, or at least you will face hefty fines.
• The vehicle belongs to the HP provider until you have made your last payment. Therefore, if you default on your payments the HP provider can reclaim the vehicle.
• Although the monthly payments of a HP deal for car buying may look lower the average dealer finance interest rate is 12.9% taking into account all the costs.

You can now get a separate loan online from less than 6% so it is must cheaper than the average dealership. A HP deal may be easier but it is expensive. You can also sell the vehicle when you want, even before you have finished paying the loan.

The secret is in the deposit. Take for example a VW Golf costing £15,000 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. By contrast, if you borrow £15,000 on a separate personal loan for buying a car you would be paying £288 per month over 5 years (6.0% APR). Therefore the £268 looks very respectable.

Think about it though. Because of the deposit you are actually only borrowing £12,000 with the HP deal – if you took out a separate loan of £12,000 for buying a car the monthly payment at 6% over 5 years would be £231 with the total payable being £13,867. The HP deal from the showroom appears attractive but it is only because of the way it is presented – you can save money by taking out a separate loan, in this case £2,220.

Another big advantage of getting a loan separately for buying a car is that it essentially makes you a cash buyer. You therefore have more scope to haggle over prices.

The message is clear – get your finances sorted out before you hit the showroom. Shop around for the best loan before buying a car.

Scroll to the top of the page to view the best personal loans
for buying a car provided by Myloanchoices.