Car finance

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New wheels?

Buying a car can be both exciting and daunting. Once you have kicked the tyres and chosen your new car, you then need to decide how you will pay for it. This could be by paying cash, or you may decide to borrow the money using some form of credit.

If you do decide to borrow, your options may depend on your financial circumstances and history of managing credit, which lenders will see by looking at your credit information.

Either way, it makes sense to consider all of the available options. A personal loan from a bank or building society is one way to go about it, in particular if your credit score is in good shape, however it is advisable to look at your needs as a whole – how much do you need to borrow, over how long etc. – and evaluate different ways of obtaining credit.

For example, if you have a bad credit history then you may want to look at alternatives to avoid facing hefty monthly repayments. These include:

• Hire Purchase

With a hire purchase agreement, you usually pay a deposit and then pay the rest in monthly instalments. With the final payment, you may be given the option to purchase the car at a price set by the dealer.

With HP, you generally pay a deposit upfront, and then pay back the remainder - with interest - over a set amount of time. With HP you are, in effect, hiring the car until you make your final payment, after which you have the option to own it.

• 0% Finance

This could be a viable option if you have a substantial deposit to put forward to buy your car. After paying the deposit, you pay the remainder in monthly instalments. It’s worth saying that 0% finance deals are not available on all cars, and that the typical duration of the loan may be short, with higher monthly repayments in order to cover the full balance within the set period. However, you are not paying any interest, which could mean savings overall.

• Leasing

Leasing amounts to hiring a car over a period of time that you specify, without ever owning it, and with the ability to give it back at the end of the leasing period. This may suit you if you like to regularly change your car but be mindful that insurance fees may be higher.

• Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) loans are secured against the vehicle and are an option if you want lower monthly repayments, and the option to return the vehicle at the end of the agreement.

Most PCP lenders require a good or excellent credit history.

Much like hire purchase, PCP may require you to pay a deposit and then monthly repayments over a fixed period - the difference is that at the end of the deal you can return the car to the supplier, keep it or trade it in for a replacement.

As you compare car financing, think about your existing circumstances as a whole, as well as how these could change over time in order to make the safest decision. Here are our tips:

  • Make sure that you can afford the monthly payments and that you would still be able to afford them should your circumstances change.
  • Beware of early repayment or other charges which kick in if you exceed the forecast mileage in personal contract plans (and also personal leasing).

Helping find the right deal for you

Experian CreditMatcher uses your credit information - as well as information you provide about your requirements and financial circumstances - to show you products that are matched to you.

This means you can see a list of credit products that you are more likely to be accepted for, and as it is a ‘soft search’ only you can see it on your credit report. For a credit product search that matches your credit information just visit .

Experian CreditMatcher does not give advice on the suitability of products to customer’s needs. If you would like to get help on which products suit your needs, it is best to seek help from a financial adviser.