Buying a car is a big, one-off expense. For those of us who are not lucky enough to have that kind of money lying around we initially have one choice to make first off – do we save up for it or use credit to buy it now? If you can wait, then saving up for it is by far the cheapest option as all of the credit options will come with a rate of interest attached, meaning you pay back more than you borrowed (unless you’re lucky enough to have a generous friend who’ll lend it to you interest free!). For many people buying a first car on finance is born out of necessity, such as moving house, changing job or starting a family – so it may not be practical to wait until you’ve saved up for it. If this is the case for you then read on as we’ll have a look at some of the options available to you.

Manufacturer Deal

Many manufacturers will offer some deals at 0% APR (subject to terms and conditions and personal circumstances). If you’re looking at buying straight from the manufacturer then a deal like this will be the cheapest APR you can get (you can’t get lower!). Make sure you shop around and check the details of each offer carefully.

Hire Purchase

With this type of finance you’ll usually pay a deposit (typically around 10% of the purchase price) and then agree a monthly repayment with the dealer for an agreed period (e.g. 3 years). It will be more expensive than buying it outright (in other words you’ll pay more in total than the purchase price) and you won’t own the car until you’ve made your last repayment.

Guarantor Loan

If you can’t access a loan from your bank – maybe you have had some credit problems in the past or even no credit at all – then a guarantor loan may be worth considering. The lenders can offer loans to people with impaired credit but will ask that the applicant also provides a Guarantor. The Guarantor will be asked to step in and make the repayments if you, the borrower, don’t keep up the repayments yourself. However, because of this additional ‘security’ providers of Guarantor Loans can offer rates that compare favourably with other non-high street products – typically representative APRs from 29% to 99%. Loan amounts available have also increased over the last few years with some guarantor lenders offering up to £10,000.

Personal Instalment Loan

If you’ve decided you’d like to take a loan out to buy your first car then the first place to start are the high street banks and lenders. You’ll need a very good credit score but these will generally be the lowest rates on offer. Go direct or use a comparison site. However, if you can’t get a loan from the big banks then there are other lenders available, offering loans to people with impaired credit histories. The rates will be substantially higher than those advertised by the big banks – which reflects the higher risks the lender is taking by lending to applicants with impaired credit. Usually the loan amounts offered will be lower than some of the options above, typically up to around £5,000. However, you’ll then be free to choose whichever car you want and from whichever supplier – even a private sale. The loan won’t be tied to the car but you must make sure you can keep up the repayments on any loan you consider. If you need some help finding out what loan products are available, why not talk to one of our loan experts who can answer your queries. We do not charge any upfront fees for our service but instead will get paid by the lender IF you decide to take out car loans.