CAR FINANCE

What is Car Finance?

Car finance is a handy way to get behind the wheel of a car without paying the full price upfront. It allows you to spread the cost over fixed monthly payments, making it easier to afford the car you want while managing your budget. With options like Hire Purchase (HP), Personal Contract Purchase (PCP), and Leasing, there's something to suit different needs, whether you're planning to own the car eventually or just want the flexibility to upgrade every few years.

What's more, car finance isn't just about getting the car—it's about simplifying the whole experience. Compare Car Finance now offer additional services, so you can sort out car insurance, schedule maintenance, and even arrange to sell the car when you're ready to move on. It's a one-stop solution that helps take the stress out of car ownership.

Types of Car Finance

Hire Purchase (HP):

With HP, you make a deposit followed by fixed monthly payments until the car is fully paid off. Once the final payment is made, the car is yours outright. It's a straightforward option if you want to own the car at the end of the agreement. However, the monthly payments tend to be higher compared to PCP because the total cost of the car is being spread out. You can't sell or modify the car during the term as it technically belongs to the lender until the last payment is made.

Personal Contract Purchase (PCP):

PCP is a bit more flexible. You pay a deposit and lower monthly payments compared to HP because you're only covering the car's depreciation (not the full value). At the end of the term, you can either pay a large final payment (known as a balloon payment) to own the car, hand it back, or trade it in for a new one. This option is great if you like upgrading cars regularly, but you won't own the vehicle unless you make that final payment.

Personal Loan:

A personal loan is separate from the car itself. You borrow the money from a lender, buy the car outright, and pay back the loan in fixed monthly instalments. Since you own the car from the start, you're free to sell or modify it as you wish. Interest rates on personal loans can vary depending on your credit score, and unlike HP or PCP, the loan isn't secured against the car.

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Frequently asked questions

Do I need a good credit score?

Having a good credit score can often lead to lower interest rates. But we work with many different lenders, so if you've missed payments in the past or know you have a bad credit score there may still be options available.

If you have a thin credit rating (never had loans or credit cards), we can also help you build your credit score before applying.

Making affordable repayments on your car finance can show you're responsible with money and help improve your credit score over time. But payments need to be made on time and the loan amount should suit your financial circumstances.

What do I need to apply?

Completing an application is easy and can be done in under a minute. We just need to know:

Your name, address and date of birth
Your employment history and income
What vehicle/amount you'd like to finance

When you speak to the lender, they will usually request:

A copy of your driving licence
Proof of UK address
Proof of income (payslip, bank statement or tax return)

How much does car finance cost?

How much it costs to get a car loan is based on factors including:

Loan amount - The more money you borrow, the more you'll pay back.
Interest rate - The interest rate, also known as APR, is the extra cost of borrowing money on top of the vehicle price.
Type of car finance - Choosing between Hire Purchase or Personal Contract Purchase can affect the monthly repayments, as PCP has a balloon payment at the end rather than spread across the loan.
Length of agreement - If you're borrowing money for longer, you pay the APR over a longer time and pay back more than the same loan amount over a shorter time.

Will applying for car finance affect my credit score?

When you make an application on Compare Car Finance, we check your credit report but this doesn't affect your score. It's a soft-search and not visible to other companies.

When you choose a lender and complete the final paperwork, they may run a hard-search which is recorded on your report and could impact your score.

Can I sell a car on finance?

Depending on the type of car finance you have, it may be possible to sell your car or leave the loan early. You aren't able to legally sell a car with outstanding finance so this will need to be settled before you sell, but services like Motorway take the hassle out of this for you.

What is PCP finance?

PCP stands for Personal Contract Purchase. You may also know it as the finance with a balloon payment. With PCP you are paying for the depreciation for the vehicle over the length of the agreement, plus interest. To get an understanding, use our calculator or read the in-depth expert guide to PCP.

Can I buy a used car on finance?

Good question! There's a misconception that you can only get finance on new cars and through a dealership. However, you can Compare Car Finance on most cars you've seen online as long as it's a reputable seller and fits the lenders criteria. As a general rule, the car needs to be less than 10 years old and have less than 100,000 miles.

What insurance do I need?

All cars on finance will need insurance, and this will need to be arranged by you not the lender before driving away. Whether you choose third-party or comprehensive depends on what you want to cover.

We also offer GAP insurance which is a separate, optional policy which protects you if the car is written off. GAP insurance gives you back the full amount you paid for the vehicle, including what's owed to the lender so you're not out of pocket or paying monthly payments for a car you're no longer driving.