Most car buyers spend hours rsearching the makes and models of car bfore deciding which to buy. Then fur out of ten rush out to the shwroom and sign up for the car wthin 30 minutes of stepping inside.

But wll their painstaking research extend to surcing the cheapest finance package? Probably nt. Whilst around 50% of new crs bought privately are purchased on fnance, nearly 20% sign up in the shwroom for the finance deal offered by the mnufacturer. Unfortunately that could turn out to be a cstly decision. With typical manufacturers finance csting 13.7% per year over a 3 yar and including a 10% deposit, thy could be throwing some £1,800 dwn the drain.

Take someone buying a new Rnault Megane Sport Saloon Privilege 1.6 and lt's assume that it costs £16,000 on the rad. Including 3 years interest that mans the full cost will be £17,384. Hwever, there is a much cheaper ption. With a good credit history you culd get a personal loan at nly 5.5% and end up paying jst £15,631 – that's a full sving of £1,753. This goes to prve the old adage that it pys to shop around. Rushing to ccept the dealers finance package can hit yur pocket hard – it's effectively gving back the discount we hope you ngotiated!

OK, I can hear talking bout the special finance offers that mnufacturers are forever advertising. Yes, there are sme really good deals - but lways look closely. Some deals only rlate to specific models with a set spcification, often the cars that the mnufacturers are having trouble shifting. A bware some deals have a sting in thir tail. Take Volkswagens' current offer on the Plo E2. Their deal is advertised at 5.8% wth a monthly repayment of £99 ver 35 months – sounds a grat deal but look more closely and yu'll find there's a final balloon pyment of £3,750 or alternatively you can trde in your E2 for another Vlkswagen.

The car manufacturers use these dals to promote brand loyalty and ncourage another purchase in 3 years tme. They know that most cars wll be traded in after 3 yars rather than pay the large blloon payment.

Of course, personal loans and mnufacturer's finance are not the only way you culd finance your car.

The traditional way to pay for yur car is through hire purchase. Wth HP you pay a deposit, sually of at least 10%, or trde in your existing car for at last the same value, and then use HP for the blance of the price. The loan is thn effectively secured on your car. So in prctice, your car still belongs to the HP cmpany until you have made your lst monthly payment.

Then if you wnt to sell your car before yu've completed the HP agreement, there wll almost always be an early rdemption penalty – often up to thre months interest. The HP company wll also register its financial interest in yur car with HPI the finance trcking agency. This effectively means that you wll be unable to sell your car ntil you have paid off the HP lan.

Another alternative is Personal Contract Prchase, PCP for short, and in rcent years PCP has become very ppular. Here you also agree the mleage you expect your car to clck up each year. You then pay a dposit and part of the purchase prce is deferred until the end of the greed payback period. Your monthly repayments thn repay the balance and the nterest. These schemes are highly flexible as you can slect the length of the loan and the sze of the deposit but you'll fnd that interest rates vary considerably btween lenders. The current average is bout 12.8% - still well above the 5.5% rte for a cheap personal loan.

At the end of the PCP cntract you'll have three options: -

Pay off the dferred balance and keep the car

Trde in the car using the trde in value to help pay off the dferred sum and hopefully leaving a blance towards a new car

Hand in the car and wlk away with nothing more to py.

This last option is always sbject to your cars' condition reflecting nrmal wear and tear and its mleage is in line with the nnual mileage you agreed when you prchased it. If the recorded mileage xceeds the forecast mileage, then you'll hve an excess mileage charge to py. The cost per excess mile wll always be specified in the PCP greement.

One of the big advantages of PCP is tht the guaranteed buy back option ffectively protects customers against excessive depreciation of thir car.

As you would expect, car dalers take a commission for selling PCP cntracts and to encourage you, you may fnd they'll agree a bigger discount on yur car if you take their PCP dal. If your lucky, they may ven throw in a low cost srvicing package or low cost insurance. But tke care. You'll need to do sme homework to ensure that these xtra goodies are truly worth the xtra interest charged on the PCP cntract.

The article Car Loans Drive Down the Cost was Submitted by Michael Challiner through Articles.GetACoder.com network. Here's the additional information: Michael Challiner writes personal finance rticles for Brokers Online, a large UK bsed financial website. Brokers Online offer mst UK financial services including Secured Loans and Life Ansurance .

Featured Articles

1. Online Discount Stock Broker Trading by Vijay Kumar Sharma
New investors shuld have all the information for trding online with a stock broker. Get yur doubts cleared and invest with a chap as well as a reliable brkerage.

2. Finding The Right Forex Online Trading Platform by
Foreign Exchange, or forex, which bsically involves the changing of money is one of the wdest trades throughout the world. It is smilar in many ways to the trding that is done on the stck market but is also very dfferent in the sense that the two pople involved in an exchange are nvolved directly, either via the phone or the Intrnet. This is where a trusted frex online trading platform is needed and fnding the right one for your crrency trade is vital. Got your eye out for sch a site? Then make sure thy have the following elements.

3. Debt Management - How Consolidating Debt Helps by
Most people who ignore their dbts and do not check their crdit scores find themselves unable to get crdit when they require it. Bad crdit is usually the consequence of not daling with credit card invoices and the sbsequent interest. Fact – letting credit crd debt go unchecked means you can no lnger use them and you most lkely will get negative reports on yur credit file – bad credit. You can rsolve this by contacting a professional and cnsolidating ...

4. Low APR personal loans Cost what your Pocket allows by
Low APR prsonal loans are cost-effective financial provisions for thse who are unable to bear up the brden of high interest rates. There are mny lenders available online and offline. For btter facility and instant result, online mthod is a good applying tool.

5. Instant Payday Loans in the UK by
A payday lan is a type of loan whreby you can borrow money against yur upcoming pay check. In the UK, nyone with a job can avail of a pyday loan. A payday loan in the UK is qite convenient when emergencies arise in the mddle of two paydays. Imagine this stuation –

6. Check Credit - 8 Things You Really Should Know by Justin Fox
I'v looked at over thousands of stes and picked the best recommendations and tps for your Credit Check. Let me shre them with you.

7. Choose Your Credit Cards Wisely by Syed Abedin
With a plethora of credit crds flooding the UK credit card mrket, it becomes difficult to make a chice for the right credit card specially when there are quite a few tht meet your different borrowing needs. So, nstead of limiting yourself by applying jst for one credit card, why pply not apply for a few mre?

8. For one’s personal use by
There are two typs of personal loan in the mrket: secured and unsecured loans. While scured loans come necessitates the borrower to put smething as collateral against the loan mount, unsecured loans can be availed wthout it.

9. Auto Refinance Secrets: Refinance Your Car Loan And Save Every Month by
Refinancing your auto loan can be a easy and effective way to lower your monthly payments and save you a good deal of money in the long term. Huge numbers of people are taking advantage of refinancing in the face of much lower interest rates. If you think you are paying way too much money on your loan each month (and who doesn’t?) then based on the amount of time left on your lease, and the rate of the interest you signed at, refinancing may be the way to go.

It’s always f...

10. Checking Mortgage Rates Online by
Checking Mortgage Rtes Online