Don’t dream it drive it!

Personal car finance is similar to a loan, however whereas a loan is borrowed and paid outright for the car so becoming the property of the purchaser on buying, car finance is slightly different. If the customer takes out a finance deal then the car remains the property of the lender until a final payment is made, much like a house mortgage, this is also called hire purchase car finance or conditional sale. Car dealers also offer these sorts of finance deals.

Factors determining what your regular payments will be if you choose to take out a finance deal include the interest rate, or APR, the repayment period, the size of the deposit and the outcome of any credit checks that are made.

In terms of companies taking out car finance it is apparently ideal for VAT registered companies who want to handle the administration of their vehicles, and have the asset shown on their balance sheet.

Advice given to customers thinking of taking out a car finance deal is as follows:

• Make sure you can sensibly afford repayments
• Check if payment protection insurance is provided in the event of loss of income

One other thing to take into consideration when taking out a finance deal is if you want to sell the car when there is still outstanding finance. You may have to pay a penalty to the finance company for early release of contract when paying back the loan. Buyers are also less likely to want to buy a car that is still in a finance deal as a release document is needed to ensure the new buyer doesn't take over the finance.

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