OK so you want to buy a car? Here’s the low down on car loans.

There are a large amount of lenders on the market so it’s worth taking a fair bit of time to see what’s been offered. Compare and choose the best deal available to you, be it from a dealer, bank or online lender.

You might want to look at getting a personal loan. With a personal loan you agree the monthly payments and length of period and that’s it.

Now another option you could opt for is that of hire purchase (HP). Most car dealers offer HP agreements. Buying a car on HP means that you pay a deposit and then monthly payments over an agreed period. Remember to check what the APR (Annual Percentage Rate) is. The APR is the rate of the interest that you will be paying so you should look for the lowest rate you can. HP payments can be higher than other forms of financing but the overall sum paid back is generally lower.

Personal Contract Purchase (PCP) is also a way of paying for a car. Ex-company car schemes can be financed through PCP with added benefits of servicing and maintenance included. The difference between a PCP and HP is that at the end of the PCP you will have to pay a final payment called the minimum guaranteed future value (MGFV), also known as a balloon payment. This is often a large sum, which means you either have to stump up to buy the car outright, walk away with nothing, or swap to another PCP scheme to keep you on the road.

If you own a property you might want to look at equity in your house or flat to free up money to buy a car. This is called remortgaging. By spreading the repayments over the period of the mortgage, this method provides very low monthly costs, although you pay back more in the long term.

If you don’t mind not owning a car outright then a Personal Contract Hire (PCH) could be for you. A PCH is essentially a rental agreement. The benefits are that you usually pay nothing or a very small amount as a deposit. Your monthly payments are smaller than a PCP or HP. When you decide you have no need for the car you just hand it back and stop making payments.