Choosing a car is always a difficult job. But still more difficult is choosing an appropriate car loan. Financial packages are that important. At times, the car dealership itself offers the finance packages. But it is not obligatory that you should opt from among the packages offered by your dealer just because you purchased your car from them. You are always free to take a loan from somewhere else, such as a bank, and pay for the car outright, and then simply make the loan repayments to the bank as with any other loan. Some of the most safe financing options are:

1. Hire Purchase

Let your deal be direct with the finance company concerned. Hire Purchase is being regarded as the traditional way of buying cars. The advantages of hire purchase are many.

• Minimum deposit
• Negotiable interest
• At the end of the term, the car will be yours.

Disadvantages too are there:

• Higher monthly payment
• Since the loan is there on the car,chances of repossession are there if defaulted

2. Personal Loans

The most promoted financing option. The greatest advantage of Personal Loan is this that the loan is not secured on the car. So you can sell the car whenever you like without having to repay the loan. The car cannot be repossessed. Other advantages are:

• Competitive rates
• Low interest
• Easy access

Disadvantages:

• High monthly payments

Dealers often make commissions when they arrange finance for you. So, don’t think that the rate is lower than arranging a loan through your dealer.

3. Mortgage

Though the lure of low monthly payment is there, you will be paying for the car for 15-20 years. Since the loan is on your house, chances are there that you may lose your house if defaulted.

Advantages:

• Low rates
• Low monthly payment

Disadvantages:

• Complicated and costly
• May lose your house if defaulted since the loan is secured on your house
• Longer repayment periods
• High total amount of interest

4. PCPs (Personal Contract Plans)

PCPs make you pay an upfront deposit, and then you pay low monthly payments. You can even sell the car if needed. Extras charges for administrative work, length of payment, APR, monthly payment, etc may require strong bargain.

Advantages:

• Competitive rates
• Low monthly payment
• Easy to get
• It’s easy to change your car every two or three years
• Maintenance charges can often be rolled into the payment

Disadvantages:

• High total interest
• You will have to keep within a mileage limit if you want to have the option of returning the car at the end of the agreement

The better the awareness you have, the more economical will be the deal. The most important thing is this that you should know exactly how much you are being charged for car finance. The annual percentage rate or APR will help you know exactly the charge of any credit. But this doesn’t mean that an attractive APR will do! Down payments and closing payments are as important as the monthly payment terms. Also, don’t fall into the lure of immense cash discounts. Providing a cash discount otherwise means charging extra for credit. In common parlance, hire purchase is often referred to as car finance.