It's often cheaper to take a loan out from the dealership when purchasing a new car.  There are often incentives in place which give subsidised or even 0% loan rates. If these are on offer then 9 times out of 10 this will be the cheapest and most convenient way to borrow the money to fund the purchase of your new car.

However, like the current car scrappage scheme where you can claim £2000 as a trade in for your old car, terms do apply. There are sometimes hidden costs in going with a car dealer to finance your new car. Firstly please be careful as car dealers offer more than just a straight forward hire purchase or loan. Most can deliver the following plans to help fund the purchase of your new car;

Hire Purchase - straight forward monthly payments over a pre-agreed term giving you full ownership at the end of that term.

Personal Contract Hire - the convenient way to drive the car you want without the costs of ownership

Lease Purchase - similar to Hire Purchase but with lower monthly payments and a balloon payment at the end, agreed at outset.

Over and above all this they may offer you a guaranteed future value for the car, but it all comes at a cost. Do your research and obtain written quotes for all of the options and make sure you get the APR or annual percentage rate. This is the actual cost of the money you are borrowing. Some dealerships will quote you a flat rate of interest. On the face of it this will look very, very cheap. To get this figure to the actual APR you can effectively double it. 

When you have all of the options down on paper, start your search for an unsecured car loan independent of the company you are buying the car from. Use price comparison websites, a broker and even ask your own bank what they can offer before making the final decision.

On a £10,000 loan payable over 5 years the savings may be vast, here is a quick example with some sample rates:

£10,000 over 60 months at 12% = £231.17 per month (total payable £13,870)
£10,000 over 60 months at 5% = £192.47 per month (total payable £11,548)
£10,000 over 60 months at 0% = £166.66 per month (total payable £10,000)

These are very rough calculations but the principle is the same. You can save money by shopping about and knowing your APRs.

As you can see the interest rate payable has a huge impact on the monthly cost so take your time, research properly and make your next car loan payments are as cheap as possible. And if you are looking for adverse credit car loans then you'll likely need bank loans for bad credit