card guide
Car Loans

Houses are the single biggest purchase you are likely to make in your life. The second isn’t so cut and dried, but it’s fairly likely to be a car. Given that you’ve probably already got quite a lot of credit and debts, and so there is a good chance another personal loan would be turned down by one of the regular banks is now the time to turn to a specialist car finance package? If so, are they really just for those who can’t get finance elsewhere?

What Car?

The first thing to bear in mind about buying a car is that there is always one that is slightly better than the one you started out looking at, and it’s always just that bit more expensive. It’s very easy to get focussed on the choice of car and put the fact that you are exceeding your carefully worked out budget. In the heat of the moment it’s also easy to say to yourself, “I’ll work out a way to pay” and your mind goes off imagining how great it’s going to be driving this newer, better car.

Don’t be distracted. Work out a budget and what you can sensibly afford and stick to it.


Cars are usually financed one of two ways: either through a loan such as a car loan or a personal loan or by being financed through HP or PCH.

HP is ‘Hire Purchase’, what was in the old days called “the never, never”, that was when HP was the only kind of credit available – that and an overdraft. Hire Purchase is simply a finance company lending you the money and expecting it back in monthly sums, usually up to a period of five years. The car remains their property until the final payment is made and as such you have to have the vehicle comprehensively insured.

PCH is slightly different, PCH stands for Personal Contract Hire and is probably best suited to people who are self-employed. In this instance you never actually own the car, you simply pay a monthly sum and effectively rent the vehicle from the finance company. Even with a Personal Contract Hire agreement you may well get the option to purchase the car at the end of the term although this won’t be advertised in the deal.

Cash sale

Going to a car showroom with a pocket full of notes might give you additional bargaining power but it’s a luxury most of us never achieve. So the option is usually a personal or car loan.

A brief browse round the internet soon reveals that these loans are a lot cheaper on the apr than the specialist car finance companies, with rates for personal or car loans ranging from 5.6% to 12%. But will they accept people with a bad credit rating? If you decide this is the route you want to take then you will have to ask them the question.

It’s worth making that enquiry before you apply for the loan as if your application is turned down and you go on to apply with several lenders and they are all turned down this will go on your record of credit and make your rating even lower!

If you have to use a specialist car financing company then you can expect to pay anywhere from 18% to 29.9% apr.

You’ve either got it, or you haven’t

So are specialist car finance companies just for those who can’t get credit? Well, at the end of the day, if you aren’t in credit trouble and you have plenty of spare money each month then the convenience of Contract Hire can be very appealing, but this is a completely different sort of motoring. The convenience lies in knowing exactly how much your motoring is costing you every month as you can opt to include all garage bills and tyres and even the road licence fee, so there are no unexpected bills at all. But it’s not cheap.

So the answer is, you might want to use a finance company either if you have very little money and are therefore forced into using one or you have loads of money which enables you to make choices about everything in your lifestyle.

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Posted on: [ November 03, 2017 ]       Add to   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon