When you want to buy a new car, you can take a loan from a bank or building society. Buying this way means you own the car from the start and, unlike dealer finance, it’s not linked to your choice of car.
- It separates the finance package from the car you buy, meaning you can sell it on at any time
- For the same reason, you can choose any car you want
- There’s huge choice among high-street and online lenders, meaning you can shop around and get a better interest rate
- You can choose how long the repayments last, generally anything from two to ten years
- If the loan is secured against another asset, you won’t lose the car if you don’t keep up repayments
- Once you’ve sold the car, you still have to keep paying off the finance owed on it. The residual value of the car is unlikely to cover it
- There can be a delay in lenders transferring money to your account
- If you don't keep up repayments, your home and possessions could be at risk
What is a personal loan?
With a personal loan, you can shop around high street banks, building societies and other lenders to choose the best interest rates and terms. You arrange the loan with the lender, who transfers the money to your account before you pay the dealer. Such an arrangement also gives you much greater flexibility to shop around to find exactly the right car.
- There are a lot of lenders offering personal loans, so make sure you shop around and compare interest rates, any associated costs and the total amount you’ll have to repay.
- Your credit record and personal circumstances may affect the rate the lender will offer you.