Cheaper ways to borrow to buy a new car
Now it's September you can buy a new car with a 66 number plate. If you plan to purchase that car on credit, make sure you know how the different options work and what they might cost.
Interest-free credit and credit cards
Some dealers offer interest-free credit for up to five years to customers with a good credit rating.
To benefit from this, you'll need to put down a deposit of at least 25%, although you can often part exchange your old car as part of this. However, you're not likely to get the best deal on the car if you use this method.
Some dealers also offer a 'fuel and go' credit option, which includes some or all of the following as part of the deal: servicing, warranty, roadside recovery, breakdown cover and insurance.
While this is a convenient package, you're almost certain to pay more than if you shopped around for the 'add-ons' separately.
You could also look at a 0% purchases credit card. This won't be an option if you're looking to buy a more expensive model (£5,000+).
You should also bear in mind that some dealers will charge a 2-3% surcharge on credit card purchases.
However, at least with this option you'll be a 'cash' purchaser and therefore have some haggling power.
The longest-lasting deals on the market are the Post Office Money Matched Credit Card and the Sainsbury's Nectar Purchase Credit Card, which both offer 27 months 0% on purchases.
Be aware that you'll be paying a hefty rate of interest if you don't pay off your spending when the interest-free period ends so make sure you repay in full or switch any remaining debt to a 0% balance transfer card.
If the dealer doesn't accept credit cards, you could opt for a money transfer card, which basically allows you to borrow cash that you can shift straight into your current account (for a fee, of course), meaning you essentially pay cash for your car.
The longest offers on the market at present are the Virgin Money 41-Month Balance Transfer Card and the MBNA Platinum 41-Month Card, which will give you 41 months, but charge a hefty 4% fee on money transfers.
Personal and car loans
You could consider taking out a low-rate unsecured personal loan or a car finance loan.
Just make sure you're realistic about the term of your loan.
New cars depreciate in value the minute they leave the showroom, so you don't want to still be paying for your car long after its value has hit rock bottom. And make sure you look at the total amount repayable, not just the APR.
Other methods
You could also take out dealer finance, but bear in mind this might be more expensive than if you had the money available.
There's also hire purchase, and personal leasing, but neither of these methods mean you own the car, you're just leasing it, although with hire purchase the car will be yours once you've paid off the hire purchase agreement.
