Loans for New and Used Cars

21 May 2010 - Which Way To Pay


Loans for New and Used Cars



Are you looking for a new (or nearly new) car?  The majority of households in the UK have at least one vehicle, so how did they pay for it?


When you buy a car from a car dealership, they usually offer you a payment plan.  Unless you can afford to pay for your car in one go, finding a way to pay for this significant purchase is important.  


Car dealerships generally offer what is known as a Hire Purchase (HP).  An HP is a long-term payment of your car, with regular instalments much like a loan.  It might seem like the easiest option, but before you sign the dotted line it is worth considering your options.


Car Loans


Before you take an HP or similar purchase plan from your car dealer, it is worth shopping around for alternatives.  You could take a direct loan from your bank, but if your credit rating is not at its best they may turn down your application.  The same goes for the car dealer – they might carry out a credit check on you.


You can take a specialist car loan from an independent lender.  These are loans which vary in length and amount which are designed to allow you to take immediate ownership of your car, by paying for it using the loan.  Then, you pay your lender back in instalments – no your car dealer.


As with any loan, it is important to compare offers because there are many different lenders on the market.  


Remember to always check the APR – some lenders cheekily don’t quote theirs until you have made the initial application.  This is a clever way to draw in customers but means you already have a credit application listed on your credit file – so find out as much as you can before you make any applications.


Many car lenders offer their loans to people who have a poor credit rating.  This is great news for people who would otherwise find it impossible to pay for their car.  Note though that the interest rates might be higher on these types of loans.


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