Types of Loans

Maiseymoo

Hi;

Am having to take out a loan as a last resort to buy a new car, just wondering whether anyone can give me some advice on the best type of loan to take out?

Totally clueless with anything like this so any help will be greatly appreciated

Thanks in advance

Apples2

Depends how much you can afford, how much you earn, what price you intend paying (to name a few).

An Unsecured Loan from your bank is most difficult to get, but the car would be yours (you can sell it at any time if you wish)

A HP Agreement is easier to obtain as the Finance is secured on the car. This can be difficult if you can no longer afford the repayments (you cannot sell it).

iazcac

Have you considered leasing a car? I have a PCP with Peugeot and is much cheaper for me and doesnt worry me I dont "own" the car

Maiseymoo

How does that work iazcac?

Maiseymoo

I don't think i would like a car on HP

iazcac

You pay a set amount each month; call it rent. At the end of the period you either:

1) Give car back
2) Pay a balloon payment and buy car outright from dealership
3) Continue paying rent but get a new car

BugsyBrowne

PCP also has its cons If you like With a mileage Limit which you have to stick to also after the end of the term You won't own the car unless you pay a balloon payment Or take another loan and the negative equity you get.

Maiseymoo

Thank you for info

chanz4

also you scratch it, you pay high.

DaniP

Hi Maisey,

There a few different options with 'car finance'

As the others said you can take out a loan and buy a cheap second hand car, you pay a monthly payment and once youve finished paying the loan, yes you own the car but youll probably be fed up of it or be costing you too much to MOT, repair etc. Then you would have to sell it/part ex and probably loose most of the money you have paid for it.

On the other hand, car leasing which the official name is 'contract hire' means you get to drive a brand new, reliable car for a rental each month. You would probably pay close to a loan amount but youd be driving a brand new car, 1 year free tax, no MOT for 3 years, cheaper tax as fuel as they are more efficient. Then at the end, you dont have to worry about the depreciation, you can simply hand the car back and walk away or you can take on a new car.

You can take it our over 3,4, or 5 years. You can pay one month rental upfront and be driving a new car in 2 weeks.

You set the mileage to what you know you will do, if you think you are doing more you can change it at any point through the agreement. Yes, the car cant be ruined when you give it back, fair wear and tear is allowed, so light scratches and stone chips are allowed, anything more you can get repaired at a local garage so you can shop around for the cheapest price.

I've leased a car for the last 4 years and I've tried to persuade my mum to do the same because shes bought a 56 plate car and shes had nothing but trouble with it and she pays the same monthly payment on her loan as I do for my new no problem car.

I have a Nissan Juke which costs me £180. I had it from a company called Purple Contracts.