Car Finance – An Introduction

For most of us, buying a car outright for its list price isn`t an option. The majority will need a finance package in order to spread the cost of the vehicle out over a manageable time.  There are a number of different ways of financing a new car (car leasing, hire purchase, car loan etc), with different levels of interest payment and benefits available from manufacturer to manufacturer.  In most cases, you will have to place a deposit on the car, but usually more favourable interest rates require a higher percentage of the vehicle`s value upfront.  Having an `adverse` credit rating also usually requires more money as a deposit. The following article considers two forms of car finance, hire purchase and a car loan. In addition, it will also provide some advice on car insurance.

Hire purchase is a frequent vehicle finance solution. The routine usually involves customers putting a deposit down on a car and paying a monthly fee to use the car. After a certain value has been met, the customer will have full ownership of the car. Until then, the finance company `owns` the car. However, the customer in question usually has unrestricted use of the car.   The contract is between you and the lender (a finance company) and in most cases it is facilitated by a car dealership. Many of the car dealers have their own finance divisions, but independent companies can also provide finance. You are expected to meet the regular monthly payments and failing to do so could mean that the car is repossessed if you have paid less than the agreed amount on your contract.  Having a good credit rating can really help towards you getting a better deal on car finance, but if you have `adverse` credit, then finance companies may often still consider you at a higher interest rate. 

Another option for drivers is a specific car loan, in which a lender provides the money upfront and you pay for the fee over a fixed time. When you have purchased your new car with a finance package, it is essential that you get your insurance sorted out as soon as possible. 

The amount you pay for your insurance for a car on finance depends on several factors, including your driving history, personal circumstances and the car itself, which may be significantly different to your outgoing model.  More powerful and valuable cars tend to cost a lot more to insure. This is because of the increased appeal to potential thieves and the increased likelihood of being involved in a road traffic accident due to the high speed which they are capable of operating at. Meanwhile, slower cars with less value are cheaper to insure. Diesel cars often tend to be cheaper than petrol-powered counterparts, so consider these factors when selecting a new car.  To save money on your car insurance, shopping around for a good deal online is a good place to start. A comparison website will allow you to quickly and easily view car insurance quotes from many different sources in order for you see what policy offers the best cover for your needs. You might even be able to get more extensive cover than your current insurer offers you for less money.