Car Loan

There are two main types of loan agreements available for purchasing a car, Hire Purchase and Manufacturer's schemes.

With hire purchase agreements, as arranged by car dealerships, the borrower hires the car from the dealer for the loan term. At the end of the agreement, when the final payment has been made, the borrower exercises his or her option to purchase the vehicle and the ownership is transferred from lender to borrower. Since the lender is the legal owner of the vehicle up until the end of the agreement, this provides the necessary security against the loan. The car will be repossessed if the borrower defaults on repayments.

A Manufacturers' scheme is a type of loan designed and advertised by the car manufacturer and can be arranged directly with them or through a local car dealership. As with hire purchase schemes, the purchaser is not granted ownership of the vehicle until the loan is repaid in full.