Car finance – what are your options?

17/12/2009

Car finance – what are your options?

Most people looking to buy a new or used vehicle will probably need some sort of car finance in order to be able to make their purchase. There are a number of options potentially available to you if you are looking to fund the purchase of a new or used car and these may be influenced whether you are buying privately or via a car dealership.

Private sale

If you are looking to buy a second hand car, then you may be looking to buy it from a private seller. In this case, you will need to have your car finance sorted before you buy. This could be arranged by:
•    Taking out a personal or car loan;
•    An overdraft.

Obviously, with the latter option you will typically incur a fee for being overdrawn, as well as any interest charges until the overdraft is repaid.
With the forme option, you will pay interest, but this may often work out less than if you paid off the overdraft in the same period, as overdraft fees tend to be higher.

Buying from a dealership

In the addition to the two options above, you may also have:
•    The option of buying the vehicle via the dealership’s own finance scheme;
•    The option of using your credit card.

Dealership finance schemes can often work out more expensive than if you arrange a personal loan yourself as the dealership may take their own ‘cut’ on the finance (eg their commission that you may end up paying within your monthly loan repayments).

Another potential ‘minus’ point with a dealership finance scheme is vehicle ownership. Depending on how the dealership car finance is arranged (for example, if it is via a Hire Purchase - HP - scheme) then the vehicle will not be yours until the last payment has been made.
If you pay for the vehicle on your credit card that you then transfer to a 0% balance credit card, that could be an option for raising finance to buy a car.

Choices

As you can see, there are lots of choices and considerations when looking at car finance. You need to ensure that you weigh up all your options so that you get the most suitable option for you.

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