Moneyextra advises on car finance

With the new 07 registrations out this month, we are likely to buy some 400,000 new cars. However, financial comparison site Moneyextra has warned consumers to consider their funding options carefully. While it can take months to decide on the right card, many people move much more quickly when it comes to car finance, taking up the first agreement they are offered.

Many people take out hire purchase agreements where the loan is secured against the car. This is convenient and is offered by many car dealerships, but there are some disadvantages. For one thing, you don’t own the car until the last payment is made, so failure to make payments has serious implications. And average annual percentage rates tend to be in double digits. You can get 0 per cent hire purchase agreements, but only if you’re prepared to deposit about 40 per cent of the car’s value.

Personal contract purchase is another option offered by car dealerships. You make smaller initial payments and defer some of the car’s value till the end of the term, when you either make a balloon payment or give the car back. A third option which may be overlooked by some consumers is taking out a personal loan. There are significant savings to be made as there are competitive deals below 8 per cent APR. In addition, those who take a loan will be cash buyers and may be able to negotiate a better price on the car.

Robin Amlôt, Senior Editor at Moneyextra says, ‘Drivers should not let the smell of a new leather interior lure them into poor financial decisions at the last hurdle. By taking the time to arrange finance before visiting the forecourt, motorists can be sure that they will enjoy every mile in their new car and be certain that they are getting more metal for their money.’