Sometimes the lure of that sporty little convertible SLK can be too much and we end up diving head first into a car finance agreement without doing our homework. The first finance offer you receive is very rarely the best, and you can pay for your car with any normal loan, so shop around and see what’s available. Many companies do specialise in offering car finance but they aren't always the cheapest so try standard unsecured and secured lenders as well.

Buying a new car is an expensive business, especially on credit. The depreciation and running costs mean you almost always loose money on cars. For example a £9,000 car paid for with 4 years finance will usually end up costing over £11,000, and the value of the car after those 4 years will be in the region of £5,000. That doesn't even include the insurance, tax, repairs and petrol. However money is there to be spent and enjoyed, so as long as you can afford a status symbol then why not splash out on a flash car?

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Car loans are personal loans, which are the most common form of loan. There are two main types of loan, these are secured or unsecured.

Secured loans are linked to the borrowers home or another major asset. Lenders can offer larger sums at lower rates on secured loans because they are less risky.

The other type of personal loans are unsecured loans that are usually available for smaller amounts (£500 - £15,000). These loans are more expensive because they are riskier for the lender as they can't repossess your house to recover the loan if anything goes wrong.