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Typical Car Finance options

Typical Car Finance options

23/11/2009

Cutting back on fuel use and driving down the cost of your insurance may be just two ways of cutting back on your car-related costs. But you may be able to save a considerable amount of motor-related money in the long-term by ensuring you get the right finance deal when you actually buy the car. Running a vehicle may be expensive in any case, so it may be particularly worthwhile to ensure that any Car Finance you take out in order to buy it is suitable.

From a few hundred pounds to vehicles costing tens of thousands of pounds, people often have to take out loans to buy cars. Although younger drivers may be able to rely on the 'bank of mum and dad' those on their second, third, or twentieth car are likely to need some form of loan in order to pay for all or part of the vehicle.

The options are broader than many people may think - and a bank may not be the best place to go, depending on your circumstances.

Hire purchase is a common way of funding a car purchase and involves a deposit typically around 10 per cent of the full price of the car. The buyer then has to pay off the rest in instalments with interest, often at a rate of seven to 13 per cent. This kind of deal is normally pretty straightforward to put together, but here the main downside is that you don't full own the vehicle until you have paid everything off, and sometimes this means you can't modify or sell the car without the permission of the lender.

Something else you may come across is zero per cent car finance. This may be available to people who are able to put down a considerably large deposit, as much as 35 to 40 per cent of the total price of the car. This in itself is something of a drawback as this may be thousands of pounds, but the main benefit with this kind of deal is that you do not pay any interest. However, another thing you may wish to bear in mind is the fact you may end up paying a considerably larger amount per month.

A less well-known car finance option is leasing, which is often used by people who want the benefits of a new car without having to actually own it. Effectively this is like a long-term hire deal, where somebody pays a monthly fee of around £100 and up. Typically you may have to state the annual amount of mileage you expect to cover in the car, plus how long you want it for and what kind of vehicle you want, all of which are factors which may determine the cost.
 

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