Types of car loan and finance

There are two main ways of borrowing to purchase a car:

Car Loan

With a car loan, money is loaned for outright purchase of the vehicle that is paid back over a period including interest. The car is the property of the purchaser on buying. Banks, building societies, finance houses and credit card companies are usual sources for loans. More information on car loans.

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Hire Purchase or Conditional Sale

Hire purchase or conditional sale is similar to a loan but the car remains the property of the lender until a final payment is made. Car dealers are also able to offer such finance facilities. More information on hire purchase.

Personal Contracts

Contract and Lease purchase finance arrangements are also available for the private buyer. The main schemes are:

Personal Contract Plan (PCP)

Personal Contract Hire (PCH)

- a no worries but expensive way to finance a car. Deposits will be low and repayments relatively high. Maintenance will be covered and so there are no extra motoring costs apart from insurance. PCHs are more suited to the self-employed or business user. More information on PCH.

Lease Purchase

- similar to hire purchase with a defined final or 'balloon' payment at the end of the period allowing the optional owning of the car at the end of the plan. Deposits can be varied but repayments relatively high depending on the final 'balloon payment' agreed.

1. Personal Contract Purchase
2. Motor Loan
3. Car Hire Purchase
4. Personal Contract Hire