Compare interest rates by looking at the APR (annual percentage rate), which includes all the charges you have to pay.Beware of early repayment or other charges, such as charges for exceeding the forecast mileage in personal contract purchase plans and personal leasing.Compare the total cost of borrowing, including all charges over the full term of the loan.To understand your options for getting out of your car finance arrangement early, see our guide Cutting car finance costs Ask the firm offering you finance what happens if you struggle to pay one month, and what options would you have if you couldn’t afford to pay.Your finance provide will be happy to answer any questions you have about it. If you don’t understand it, it might not be the right finance solution for you. Make sure you understand the terms of agreement such as mile limits, balloon payments and paying for maintenance.The car will need to be in good condition too, or you might be charged for repair costs. If you haven’t, you’ll need to pay the difference before you can get out of the contract. To end the deal early or cancel it, you must have paid half the value of the vehicle. If you haven’t got this money saved, you might have to take out another loan to pay it off. It will be a larger payment than your monthly payment. This is based on what the dealer thinks the car is worth now – Guaranteed Minimum Future Value (GMFV) – and can range from a few hundred to a few thousand pounds. Use the resale value towards buying a new car.Return the car to the dealer and pay any charges that you might have incurred (for example, through excessive wear and tear or going over the milage).This is based on a forecast of annual mileage over the term of the agreement. Instead of getting a loan for the full cost of the car, you get a loan for the difference between its price brand new and the predicted value of the car at the end of the hire agreement. Keep in mind though that the total amount of money you’ll pay back is often higher. This type of car finance deal is similar to a hire purchase agreement, but you usually make lower monthly payments.
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