Many people choose the flexibility given to them by financing their motor car purchase with a personal loan. It means you can arrange the money in advance. This puts you in a strong position with the seller because you are effectively a "cash purchaser". You can also be choosy, shopping around for your ideal vehicle knowing the money is already taken care of. With the lowest interest rates well below 10% this can be an attractive option.

Utilising a personal loan also means that you can buy new, second hand, through a dealer or privately with equal financial strength. When buying a second hand car, you should make sure to check out the vehicle history to confirm that it hasn't been an insurance write-off in the past, that there isn't any outstanding credit or worse still, that it has been stolen. You should think hard before taking out a loan over 3 - 4 years as the interest charged over a longer term could make the total amount borrowed excessive measured against an ageing asset.

There are lenders in the market place that are prepared to look sympathetically at individuals who have had a bad credit history in the past, and even CCJ's, when high street lenders are unlikely to be willing to assist. When you buy a motor car, and you need, as most of us do, to take out a car loan to finance the transaction, if you buy through a dealer you will almost certainly be offered the motor car finance by the seller.

How do you tell if this is the best deal for you?

You will probably be offered hire purchase. Not surprisingly this "does exactly what it says on the tin". Literally, you are buying the motor car, but until the very last payment is made (in two or three years time?) the car is owned by the hire purchase company and you are hiring it back from them. Two things to bear in mind as a result of this are that if you fail to make the car loan repayments for any reason the hire purchase company may repossess the car and you can't sell it without completely clearing the debt first.

Be careful of 0% finance deals for car purchase, although the interest rate you pay is zero, someone is paying for the cost of providing you with the money to buy the vehicle, and in the end it is the consumer that bears that cost one way or another.

Another car buying option is the personal contract purchase scheme or PCP it is often referred to. These are offered by manufacturers, dealers and some banks and finance companies and although they seem complicated they can be beneficial.