Choose the Right Forecourt Finance

Statistics say that almost a half a million purchase transactions will take place in the UK with the releasing of new cars each year, as each driver tries to be the first to drive one of the new cars for the season. However, the majority of those purchases will be financed with the first credit agreement that comes their way.

Purchasers need to be aware that there are many offers out there for those that want to buy a car and get a good deal at the same time. Finance experts say that it is possible to get a good deal and a new car at the same time, as long as you look into your options first.

Most commonly people choose the first form of forecourt finance that is offered to them which is HP or hire purchase – which means that the car is used as collateral. Most dealerships offer HP which is why it is the most common.

HP has some very real disadvantages starting with the fact that you do not own the car until the loan is paid off. This means if you miss payments they will come take the car back from you. Also, you will find that the average APR’s for this type of financing are in the double digits, unless you can find a 0% interest deal, but that usually means that it is only for a year or two and you have to put down about 40% of the car to get it.

You can also opt to contract purchase the car, which means over the next three years (usually) you pay for a portion of the car. Then at the end of the contract, you can either pay the rest of the amount due, switch the car you have for another car on their lot, or just give the car back and walk away. Payments are usually lower than HP, but if you plan on making the payment at the end and purchasing the car then you need to save a little each month toward that payment at the end.

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