Car Purchase

Car purchase personal loans are now the most popular way to borrow money for the purchase of a new vehicle. Over 25% of buyers take out this type of car purchase loan 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 because it is quick and easy. However, a Hire Purchase (HP) deal has some serious drawbacks when compared to a car purchase 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 a car loan 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 for a car purchase 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 for your car purchase.

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 car purchase personal loan 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 the car purchase 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 for a car purchase, in this case £2,220.

Another big advantage of getting a loan separately to your car purchase is that it essentially makes you a cash buyer. You therefore have more scope to haggle over the price of the car purchase.

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

Scroll to the top of the page to view the best car purchase loans provided by Myloanchoices.