Best way to finance a car?

[Magstermay]

We are shortly going to trade our car in - it's worth about £2,300 and we will probably be spending £10-12,000 on another used car. I would generally prefer to own the car outright but have not completely ruled out PCP. I have just started a new job and have a 3 and 1 year old so a bit worried if I get the mileage wrong/ there is damage to the car if I go down the PCP route.

My main question is HP vs bank loan to purchase as the APR seems much lower on the latter. We would, however, like to move house in the next couple of years and I am wondering if there is any difference in the way the banks view these two things for mortgage purposes or credit rating? It might sound daft but in my head 'car finance' sounds much better than 'bank loan'!

Any help gratefully received.

When it comes to approving mortgages a bank are interested in monthly outgoings versus income to check affordability. If a loan or other financial commitment is ending very soon (i.e. a few months) they will be interested in that but the affordability needs to be there each month.

So if you are looking at owning the car outright shop around for the best APR to keep costs down

Personally I did PCP a number of years ago but knew the mileage would be far less than the lowest mileage they quoted on. So at the end of the 3 years I paid the pre-agreed balloon payment to own the car but it was worth a few hundred more than I paid. At the time the APR of that by the dealer was also far lower than a HP agreement or unsecured loan so made sense financially

I'd go with bank loan as the interest rate will be a lot lower, unless you buy brand new and get a 0% deal from somewhere.

I believe Mortgage companies will treat any loan be it HP or a bank loan as a debt when you apply for mortgages.

I have a friend who leases his car. Costs him x hundred a month depending on the vehicle and he gets a new one every six months. If he goes over on the mileage, he pays a bit more so you could always inflate the mileage if you're concerned about additional costs.

Best of luck choosing and enjoy your new car!

Thank you Girl and Dreaming, I will have a good look at getting the best APR!

Saw this one last night, lowest APR I've found so far

www.tsb.co.uk/personal-loans

I have a friend who was a car salesman and I told him I was getting a PL for my new car as interest rate was slightly lower. He told me categorically to go with HP as it gives more rights and protections than a PL does.

If HP remember you can hand the car back and walk away from the obligation if shit ever hits the fan. If its a personal loan you will be welded to it regardless of future circumstances.

Thank you Sheraaagh that's a good rate!

hamiltoes that's a good point, I hadn't thought of that. Lots to think about!

Bank loans 100%, also HP means you don't actually own the car till the last repayment has been made x

There will be penalties if you hand back a HP car early. It's not a free pass to change your mind whenever you want.

If you pay with a loan, you can always sell the car and buy a very cheap one. Putting a decent deposit on it should mean that you get enough money back to pay the loan off too, or most of it at least.

We have done this but got a 0% credit card for the £5000 we needed and transferred every time the 0% ran out.