Guide to Car Leasing – part 2 of 7
Before we examine car leasing in the UK, there are two other possible ways to secure car finance that might appear more straightforward on the surface than delving into the world of car leasing deals.
Pros and cons of personal car loans
The great advantage of a personal loan is that it allows you to own the car from day one. Once you take out the loan and buy the car, it is in your name and yours to keep. However, where personal car loans become more difficult is that the majority of car dealers do not offer clear-cut car loans and the APRs vary widely between car loan providers.
Be aware when taking out a car loan, that the money you will repay will exceed the original valuation of the vehicle plus interest. That means that you are paying more than the car is worth from new… and by the time you have finished making repayments it is likely to be worth considerably less. Also bear in mind that you might not receive the loan rate advertised when you apply and every car loan application will leave a footprint on your credit score. Receiving a poor rate could leave you paying as much as £2,000 extra on a £10,000 loan. There is also a large element of risk - if you can't afford to make repayments you could lose your car or even your home if you choose to take out a secured loan.
That's not to suggest that car loans should be ruled out. There are certainly advantages, including being able to drive away with the car immediately. They are best suited to those who are confident they can repay the money borrowed quickly. The key is to shop around and ensure you're getting a competitive rate. Use the personal loans comparison tool to see what is available to you and use the SmartSearch facility to look for loans without leaving a credit score footprint.
Advantages of car loans:
- You own the car immediately.
- Huge variety of lenders with no restrictions on type of car, mileage, etc.
- Well-suited to those who can repay quickly.
Disadvantages of car loans:
- Lenders are choosy and you will normally need a good credit score to secure a decent rate.
- You could end up paying a lot more than the original value of the car.
- You could lose your home or car if you do not keep up repayments.
In part three the moneysupermarket.com guide examines hire purchase.
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