There are many types of finance available to help you buy a new or used car. Find out which one is right for your budget.

Essentials

The most important thing to check before agreeing to any loan is the total amount you will pay over the loan period.

	Study the Annual Percentage Rate (APR) – the lower the rate, the less you'll pay in interest
	Understand additional payments such as setup fees or early repayment charges
	Compare the total amount you'll pay back – a lower APR over a longer period may sound appealing, but it could cost more in the long run

Unsecured personal loans

This is a loan which is based on your ability to make monthly repayments. No assets, such as your house or car, are used as security for the loan.

	The monthly repayments and loan length (term) are fixed
	A car bought with an unsecured personal loan is owned outright by you and can be sold at any time, but the repayments will continue regardless of whether you still own the car
	Most unsecured personal loans cannot be repaid early without incurring a penalty payment
	Chooseing a deferred loan may permit lower monthly payments, but with one large payment at the end of the loan contract

Secured loans

You can secure a loan against assets such as your home, which allows larger amounts to be borrowed over a longer period.

	Lower monthly repayments than equivalent unsecured personal loans are usually available
	If you cannot make repayments, the assets used to secure the loan can be repossessed

Hire purchase (HP)

Many dealers will offer you Hire Purchase to buy your car over a set period, with fixed monthly payments.

	An initial deposit may be required
	A bigger deposit reduces monthly repayments
	You only own the car when the last payment has been made
	You must settle the finance debt before selling the car

Shop around

Whatever type of finance you're offered, always shop around and negotiate hard.

	Know your best deal before going to a dealer – they may not match the offer
	Negitiate with dealers to get the finance repayments down – taking out finance with a dealer can mean a bigger discount on the car
	Adding the cost of the car to your mortgage at a lower interest rate sounds appealing, but you could end up paying more in the long run, and will almost certainly be paying for your car long after you've sold it