Motoring » Buying A Car Buying New Buying Used Finance Insurance Buyer Beware On The Road On Two Wheels Emotive     Right, you've got a figure in mind and a car waiting to be yours. But in order to decide which type of loan you need, you need to consider your plans for the car. If you intend to buy a new or secondhand car and keep it for at least four years, then a straight loan or hire-purchase will cost you less in the long run. If you're buying new and plan to keep the car for no more than three years, then swap it for another new car, you should consider a personal contract purchase plan (PCP).   STRAIGHT LOAN You obtain the money in advance to buy the goods outright, then repay the debt in agreed monthly instalments. Available from: banks, building societies, independent finance companies. Effectively, you become a cash buyer You can buy from anywhere and are free to negotiate the best price The car is yours from the start Harder to obtain than other types of finance Lenders prefer homeowners who have sound finances Two types of loans are available, secured and unsecured. Secured is cheaper, but the lender can confiscate whatever you offer as security if you fail to pay on time. In extreme cases, you can lose your home  HIRE PURCHASE You pay a deposit, a fixed amount for an agreed number of months and then you own the vehicle. Available for new and nearly new cars - used cars over two years old are often excluded because their values will be too low by the time the loan ends. Available from: banks, car dealers, loan companies. Easy to obtain and straightforward Cheaper than some other types of loan Car remains the lender's property until the agreement ends. Until then, you cannot sell the car without obtaining permission If you fall behind by as little as two repayments, the finance company can repossess the car, sell it cheaply at auction then sue for anything still owed, plus their costs  PERSONAL CONTRACT PURCHASE You pay a deposit (up to 20% of total), followed by agreed number of low monthly repayments for up to three years. A final payment must then be made. This is agreed at the start and is known as the Guaranteed Minimum Future Value (GMFV). At the end of the agreement that you can keep the car, hand it back, or part-exchange it for another new car. Available for new and nearly new cars only. If you want to keep the car you must pay the GMFV. If you hand it back, you owe nothing more. But you won't have a penny of your deposit or payments refunded. If you part-exchange the car, the dealer will value it. If it's worth more than the GMFV, he'll put that amount towards the deposit on your next car. But if it's worth less you won't have to make up the shortfall. Available from: car dealers, independent finance houses, banks Cheaper monthly payments than for other types of finance Convenient way of funding a new car every two to three years Dearer in the long run than a straight loan or hire-purchase Car belongs to the finance company until the PCP ends, so you can't sell it easily If you need to end the agreement early, you may have to pay a penalty Car is subject to agreed annual mileage limits (you'll pay extra if you exceed them) must be serviced correctly and kept in good condition NEXT: GETTING THE BEST DEAL BACK TO BUYING A CAR HOMEPAGE