Upgrade your old banger to something a bit more special
Whether you're buying a new car or replacing a used one, car loans make it easy to get the necessary cash. There are plenty of packages to choose from but it's important to read the small print: some of the most attractive deals could give you a nasty surprise.
Car loans tend to come in two flavours: standard repayment loans, and car purchase plans. Purchase plans are car loans with a difference. Instead of borrowing the entire purchase price of a car, you borrow most of it – say, 50%. So instead of borrowing ten grand, you might borrow five – but you can still buy a ten grand car. When your loan is complete you can either sell the car to pay off the remaining £5,000, take out a new purchase plan on a different vehicle, or keep the car and continue paying the loan until you've given the bank its full £10,000.
You can also get unusual car loans such as personal contract purchase (PCPs) and hire purchase. Hire purchase means the lender owns the car until you've paid your debt in full – so you could lose the car if you miss payments – while PCPs are more like rental or leasing: at the end of the period you can either buy the car, start a new contract or walk away. But beware: PCPs have mileage limits and if you exceed them or cause excessive wear and tear, you'll be hit with an invoice at the end of the contract period.
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