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There are a number of financing options available to those looking to purchase a new car, with methods and sources available to suit a wide range of needs and circumstances. It is important that you look at the options that are open to you before you start looking for a car, as the methods for which you are eligible may determine where you have to get your car from and what sort of price range you should be looking at.

Some methods of finance are more expensive than others, and your credit rating and circumstances will determine which finance options are open to you. Below you will find five popular methods of financing the purchase of a car:

1. Bank loan: A number of banks offer specialist car loans to those with decent credit, and in some cases you can enjoy extra benefits with these loans, such as free HPI checks, discounts on insurance cover, and free or cheap breakdown cover. In most cases you will need to have good credit to get a bank loan for your car purchase. The amount that you will be able to borrow will depend on a number of factors, including your income, employment status, and credit rating.

2. Homeowner loan: If you are a homeowner, do not have a good enough credit rating for a bank loan, and do not want to look at options such as dealership finance or HP, you may want to consider a secured loan, which is a loan that is secured against your property. You can enjoy longer repayments periods with this sort of loan, and this means that you can reduce the monthly amount that you have to pay out on your loan.

3. PCP: Personal Contract Purchase, or PCP, is where you can make monthly repayment on your car, with a large chunk of the value deferred to the end of the loan in the form of a balloon payment. At the end of the term you can return the car and pay nothing else for it, pay the balloon payment and keep the car, or continue with the plan and switch to a newer vehicle.

4. HP: Hire purchase, or HP, is another common form of car financing, and this is where you make monthly payments on the car for a specified term. You continue to make the payments throughout the term, after which the car becomes yours.

5. Dealership finance: Many dealerships offer finance these days, but this form of financing can be expensive. There are a number of dealerships that offer their own finance to those with bad credit, and for those with no other options due to their credit rating this is often the only way to get a newer vehicle.