For many of us, the prospect of paying thousands for a second hand vehicle doesn't make much sense when you can now enjoy all the benefits of a brand new car at a fraction of the cost, with a low deposit and manageable monthly repayments as part of the deal.

This notion of 'financing' a vehicle is popular over in the States, but is only just gaining momentum here in the UK. If you've been considering financing your next car then here's a quick breakdown...

Hire purchase (HP)

Hire Purchase is a form of car finance. It involves the buyer paying for the car in instalments over a select period of time (usually 12-60 months) and you are usually required to put down a reasonably sized deposit. It's a little more expensive than short term car financing agreements, but the car is yours once the payments are complete.

Why it might be right for you: this is one of the most popular ways of getting your hands on a brand new car for a low upfront cost, and once all the payments have been made the vehicle is yours.

Personal contract plan (PCP)

For those looking for lower monthly payments a PCP is a popular choice. You also enjoy the option of taking the car back after three years and leaving with a new one. It's great for people who like to switch their vehicle regularly.

You aren't paying for the car outright with this finance option; instead you are paying the difference between the sale price and the car's price of resale. Your mileage and any wear and tear will affect you when you hand back the car, as many people have to pay fees due to mileage being over the agreed limit and any scratches or dents on the vehicle.

Why it might be right for you: you get to enjoy a brand new car every three years for low monthly repayments.

Personal loan

If you'd rather own the car outright, but need a way to finance this, then a personal loan might be a viable option. You can obtain one of these via your bank, but be sure to shop around for the best interest rate.

Why it might be right for you: you own the car outright and can choose a loan with an interest rate that works with your financial situation.

Personal leasing

If you fancy simply hiring the car, but never owning, personal leasing might be a good option. Most of the time servicing and maintenance is included in the costs, you just need to ensure you keep the car in top condition and don't exceed the mileage limit.

Why it might be right for you: the car never belongs to you, but it does mean you get to enjoy a brand new vehicle for a fixed cost and you don't need to worry about the car's depreciation in value.

If you're looking for further information when it comes to car finance options, the Money Advice Service offers detailed explanations on their website as well as pros and cons for each.