Car Finance In The UK

If you’re looking to buy a car, whether it’s brand new or second-hand, you’re probably unaware that there are lots of different types of car finance in the UK. And unless you have the money to buy your car outright, it will be via some kind of finance deal that you actually buy your car. Therefore, knowing what your options are and what one is best for you will give you a head start, as well as make sure you pick the option that’s best for you.

Bank Loan or Car Dealer
Although there are a few options available to you, the two main ways of getting car finance in the UK are through a bank loan, or via the car dealer itself. There are pros and cons to both these ways, and a lot of it depends on your personal circumstances.

- Bank Loan. One of the most common ways of arranging car finance in the UK, a bank loan offers you certain advantages over a car loan or finance agreement. The main advantage is that you can feel safe in the knowledge that it’s not a back street company or lender that’s providing the money. Interest rates are usually quite good as well, and there are safeguards in place should the bank ever run into financial problems.

The drawback to using a bank for arranging your car finance is that they can often be limited to what they can offer you. They may not have access to the amount of deals and packages that a dedicated car financing company can offer; also, your credit status can work against you, if it’s not in the best of health.

- Car Dealer. The obvious advantage of using a car dealer for your car loan is that it’s all under one roof then. You go the dealer; the salesperson sells you a car; you arrange the loan on-site; and then you can drive away, even the same day if the circumstances are right. Plus, they can often help if your credit isn’t too good.

However, the drawback to using a car dealer is that they may be tied into one specific finance company as well, which limits your options just as a bank loan does. Also, if you do have bad credit yet the dealer can still arrange finance for you, it’s usually at the expense of higher interest rates.

Despite these being the two most popular methods of arranging car finance in the UK today, there are other options available to you. For example, if you search the Yellow Pages or via an online search engine such as Google, you’ll find many smaller lenders who can arrange car finance for you. Just be wary of the interest rates you may come up against, though.

Another option open to you is leasing the car. Instead of actually buying it outright, leasing a car still sees you making monthly payments. The big difference here, though, is that instead of owning the car, you’re essentially just renting it out. There is an option to buy it at the end of the lease, however, and an added bonus is that you don’t have t worry about maintenance costs – the lease company takes care of that for you. In fact, leasing has become one of the fastest-growing methods of arranging car finance in the UK today.