car finance options Archives - Page 5 of 7

What is CS Car Finance?

When you’re financing a car, it’s important to compare all of your options to find what’s best for you. One of the options available is CS car finance – but not everyone is familiar with what it means and how it works. Read on as we outline what CS car finance is.

CS car finance explained

When it comes to car finance, CS stands for conditional sale – which goes some way to explaining how it works. The sale of the car is dependent on the buyer meeting conditions of their CS agreement.

These agreements are also known (and possibly better known) as hire purchase (HP). Here’s how it works:

The buyer makes monthly repayments towards the cost of their car, plus any pre-agreed interest charged by the lender.
Repayments are made over a course of 1-5 years. A longer term means lower monthly payments, as you’ll be spreading the cost more. However, it also means more interest overall as you’re borrowing for longer.
At the end of the term, you own the car. Unlike PCP, there is no option as to whether you do or don’t buy the car.
That also means there’s no balloon payment – by the end of your term, the car will be fully paid off.
An upfront payment isn’t always necessary, though it will reduce the amount left to pay each month – and, in turn, the amount of interest you pay.
Because you will own the car at the end of the term, there are no charges for damage, excess mileage or depreciation.

Car finance made easy

At My Car Credit, we’re dedicated to making car finance clear, simple and accessible for drivers throughout the UK. That extends from our straightforward explanations of car finance options like CS finance to our hassle-free online application process. Calculate your car loan today to put us to the test.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

Can I Get Car Finance with a Provisional Licence?

Car finance is a popular option for all kinds of drivers, not least those getting their first car. But what about buyers who haven’t actually passed their test? There are lots of people out there who want to buy a car ready for the moment they pass or even learn and take their test in a new set of wheels.

In this post, we’ll explain whether you can get car finance with a provisional licence and the limitations in doing so.

Car finance with a provisional licence

The good news for the people mentioned above is that you can get car finance with a provisional licence. The main requirement is that you’re legally able to drive the car you’re buying.

With a provisional licence, that simply means you need someone with you who is over 21 years old and has held their own full licence for three or more years. Or a qualified driving instructor, of course. It’s also worth noting that you’ll need to be at least 17 years old, even though you can apply for a provisional licence once you reach 15 years and 9 months.

Because you haven’t passed your test (and there’s no guarantee you will), lenders may put some limitations on the kind of car they will help you finance – and how much you can borrow. An upper limit of around £25,000 can be expected, although this depends on affordability.

If you want to increase your chances of success or get more freedom when it comes to your car finance options with a provisional licence, consider the following:

Joint application – You can apply for joint car finance with someone living at the same address.
Guarantor – Getting someone to guarantee your loan will give lenders the reassurance they need.

Talk to our car finance experts

My Car Credit aims to make it easier to get the car you want and need, whatever your circumstances. Check your car finance eligibility online today to get started, and don’t hesitate to contact our team on enquiries@mycarcredit.co.uk if you have any questions.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

8 Advantages and Disadvantages of a Balloon Payment

How Does PCP Work at the End of the Term?

What is a Guarantor Loan?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options guarantor Jan24 joint application learner driver provisional licence

Refused Car Finance – What to Do Next

Car finance can be a fantastic way to secure the keys to your dream ride. However, it’s not uncommon to be refused the first time around. There are all kinds of reasons why you may have been refused car finance, some easy to overcome and others a little more complicated.

The good news is, there are always options. If you’ve been refused car finance but believe you’re a reliable and worthy borrower, this guide is for you! Read on as we cover everything you need to know about how to deal with a rejected car finance application, what to do next and the steps you need to take to get behind the wheel of a new car.

Step 1: Understanding why you were refused car finance

The first step is to get a better idea of why you were refused car finance. Understandably, most lenders are strict about who they approve for finance. After all, a car finance loan is a big commitment and lenders want to make sure they recoup their investment. Here’s a few of the most common reasons why you may have been refused car finance:

A bad credit score

A bad credit score is one of the most common reasons applicants are refused car finance. Most lenders use consumer credit reporting agencies such as Equifax or TransUnion to assess the suitability of car loan applicants. Equifax issues scores of between 0 and 700, with the average Brit clocking in at around 380. TransUnion rates borrowers on a 0 – 710 scale, with averages in the UK sitting at around 610. Experian is another popular agency and ranks you on a scale of 0 – 999.

Why do you have a low credit score? It’s due to poor credit history. Credit reference agencies keep track of bad credit activity, such as missed payments on utlity bills, outstanding debts on finance or a lack of steady income. Hard searches on your credit file typically display this for up to six years before the date you’re applying.

It’s not always easy to maintain a glowing credit score, as many Brits know. If you’ve ever missed a payment on your credit card, you’re not alone. The latest YouGov research revealed around 15% of UK adults have defaulted on credit card payments, which can knock a decent amount of points off your credit score. The figure is even higher in London, where 19% of credit card holders have missed a payment.

An ambitious budget

In other cases, your budget may be too ambitious for car finance lenders to approve. When assessing your application, lenders will consider personal circumstances, such as your employment status, income and ongoing life expenses to determine if you can afford the loan. If there are any doubts, your application may be refused.

Let’s say you want a hire purchase deal that costs £500 a month and you have regular income of £2,000 from your monthly salary. You might think applying for car finance is a sure-fire thing. But once you factor in mortgage or rent payments, utility bills and other typical outgoings, you might only just have enough left to make the payment to your finance company.

Even with a good credit score, it might be too much. But pair that with a less-than-perfect credit score, and many lenders won’t want to take the risk. As well as risking missed or late payments for themselves, mainstream lenders have to lend responsibly to avoid finance agreements leaving customers worse off. So, without the right affordability, lenders could refuse your car finance.

Incomplete application

Your application doesn’t just offer lenders insight into your borrowing history but also your competency and organisational skills. Incomplete applications can be an instant turnoff for lenders, so it pays to give your documents a thorough once over before hitting send.

When you apply online, it can be tempting to send old documents that are stored on your computer or phone, for example. Maybe you have recently changed address, meaning you’ll need different documents to apply for car finance. That’s often the case for younger customers who have just moved out having passed their driving test!

Finance companies have their own criteria, so every little error could negatively impact your chances of securing that dream car.

Now you have a better idea of why you were refused car finance, let’s take a look at what to do next…

Step 2: Enlisting the help of experts

Car finance can seem complicated but with the help of experts, it doesn’t have to be. At My Car Credit we specialise in getting Brits into the driver’s seat of their ideal car, no matter what their credit score. How do we do it?

A large lending panel

With access to one of the largest lender panels in the country, we take a wide-reaching approach to car finance. Instead of considering just a handful of preferred lenders, we reach out to dozens of finance companies across the country. This drastically improves your chances of being approved for car finance, no matter what your circumstances, borrowing history or credit rating.

If your credit profile doesn’t meet one lender’s criteria, you still have a chance of being approved by one of our other lenders. That’s how we secure finance agreements for young drivers, self-employed applicants and more.

Award-winning technology

We’re part of Evolution Funding, one of the largest and most trusted car finance brokers in the UK. Our service is backed by their award-winning technology, making it faster and easier for us to match your loan application with the right lender.

A personalised approach

There’s no one-size-fits-all approach at My Car Credit. We assess every car finance application individually, meaning you’re matched with the best possible lenders for your unique circumstances. If you’ve had previous rejections due to a poor credit rating, that doesn’t mean you can’t get car finance with us.

For more information, check out our guide on car finance explained.

Step 3: Improve your chances of a car finance agreement

After you’ve developed a good understanding of why you were refused car finance and have enlisted a team of experts to help with your application, it’s time to start improving your chances. Here’s how:

Boost your credit score

There are lots of ways you can boost your credit score, some easy and others requiring a little more time and dedication. Registering on the electoral roll and keeping on top of regular payments such as a credit card repayments or your phone bill are both great ways to improve your credit score. If your credit score is lacking due to a lack of financial history, applying for a basic credit card can be a good way to develop a positive paper trail that establishes you as a reliable borrower.

Pad out your deposit

A small deposit suggests you’re just scrimping by and can be a red flag for lenders. Saving cash where you can and using it to pad out your deposit is a foolproof way to improve your status as a borrower and show lenders you can commit to a regular savings regime.

If you can afford a larger deposit sum upfront, it’s always worth putting it towards your new car. It will reduce the total loan amount, making car finance less of a risk for the lender. It will also reduce your monthly repayments, so you can soon save back the money you added to your deposit.

Securing car finance with poor credit history

Just because you have a less-than-perfect credit history, it doesn’t mean you’re out of the running for a loan. With the right approach, your chances of securing car finance with poor credit are high. If you’re struggling with other barriers such as being self-employed or a lack of credit history, we can help.

At My Car Credit, we understand the difficulties you face with a poor credit rating. Not least that a hard search will stay on your credit file. That’s why we only use a soft search initially to get an idea of your credit profile before moving onto the next steps.

Whatever information we receive from the credit agency, the search won’t appear on your credit report. But even if we find you have bad credit, we can still work to get your application approved if repayments are affordable.

Ready to get the wheels moving on your application? Get in touch by emailing enquiries@mycarcredit.co.uk or give us a call on 01246 458 810 to find out more about how to proceed after being refused car finance.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Car Finance with Fair Credit: What You Need to Know

Is Car Finance Good for my Credit Rating?

Why Was I Denied a Car Loan with Good Credit?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options credit score Jan24 poor credit refused

How to Find Car Finance for Young Drivers

Getting behind the wheel of a car is an exciting milestone for young drivers. Whether it’s a brand-new Ford Fiesta or a second-hand SEAT Ibiza, the sense of freedom that comes with a new car is invigorating. Understandably, many young drivers don’t have the cash to purchase a car outright. This is where car finance for young drivers steps up.

With a strong application, a positive attitude and a good amount of groundwork, you can take advantage of car finance for young drivers and get the keys to your new ride ASAP. Of course, car finance for young drivers does have its challenges. That’s why we’ve put together this guide designed to help you build a strong and attractive application.

Expand your horizons with a large lending panel

When it comes to securing car finance for young drivers, a large lending panel makes a big difference. It’s definitely possible to find car finance as a young driver, but barriers like lack of experience and financial history make it a little harder than usual. Enlisting the help of a broker can be a great way to expand your horizons and expose your application to as many lenders as possible.

One of the first things a broker will assess is eligibility and of course, age is a factor. Can you get car finance at 18? Absolutely. Here’s how a broker can help:

Let a broker do the hard yards

Instead of individually contacting lenders, a broker does all the legwork for you. They have the experience and expertise to match your application with the right lenders and products, thus increasing your chances of success and helping you secure the best interest rates and loan terms on car finance for young drivers.

Contrary to popular belief, many lenders are excited to help young drivers get behind the wheel of their first car. They won’t automatically refuse applications based on age and some even offer products designed especially for young drivers. You just have to know where to look! Once again, this is where a broker comes in.

Brokers are also a fantastic resource as they can help get you up to speed on the different types of car finance for young drivers. There are several different options available in the UK, each with its own unique pros and cons. As a young driver it’s important to understand what you’re signing up for. Brokers can help you navigate the car finance realm and select a product that’s right for you.

Choose an affordable vehicle

Naturally, most lenders will be wary about offering car finance to your drivers eyeing vehicles featuring high-powered V6 engines. Similarly, your chances of securing car finance for young drivers are lower if you’re shopping for a top-of-the-range Jeep 4×4 or luxury model like a Chevrolet Corvette. Even if you have the best intentions, applying for car finance to purchase these sorts of vehicles can imply you’re a high-risk borrower. Keeping your application realistic and down-to-earth will help you win over lenders and find the best car finance deals for young drivers.

Choosing an affordable vehicle not only boosts your chances of being approved for car finance but can also slash the cost of insurance. Most young drivers are hit with big premiums during their first year of driving, with many paying more than £2,000. As a young driver, it’s worth considering models that are cheap to insure. This includes popular cars like the zippy Hyundai i20 and the much-loved Fiat Panda. Want to know more? Don’t miss our roundup of the 10 cheapest cars to insure for young drivers.

Consider ‘black box’ insurance

As well as bringing down your premiums, ‘black box’ car insurance can be a great way to win over lenders. Also known as telematics, this type of insurance policy sees a black box installed in your car. It uses GPS to collect data on your driving behaviours, including things like speed, mileage, braking habits and the time of day you get behind the wheel. This data is used to assess your driving style and calculate a premium, ideally less than the blanket policies offered to other young drivers.

Ultimately, motorists who drive safely and responsibly are rewarded with lower premiums. Black box insurance can also help show lenders you’re committed to being a conscientious, low-risk driver.

Take advantage of young driver incentives

While car finance for young drivers does have its challenges there are also some great perks and incentives out there. Some dealerships offer student-friendly incentives while others attract young drivers with special rebates. You may also be eligible for discounts on your insurance premium, gifts such as retail vouchers and cashback schemes.

Shopping around for these deals can be tricky, which is where a broker can help. They’ll assess your application and match you with lenders who are most likely to approve your loan and ideally, offer you some great perks.

Tips to boost your credit score as a young driver

Lack of financial history is one of the biggest barriers young drivers face when applying for car finance. Below, we cover some quick and easy ways you can build a borrowing history and boost your credit score. In a matter of months, you can drastically improve your chances of securing car finance for young drivers.

Apply for a low-limit credit card

Many banks offer low-limit credit cards designed with students and young people in mind. Applying for one of these products can be a great way to build your credit history, as long as you use it responsibly and pay off your debt every month.

Pay off any existing credit card balances

If you already have a credit card with a significant balance, doing everything you can to pay it off is a guaranteed way to improve your credit rating.

Set up direct debits for bills

Rather than topping up your phone on a pay-as-you-go basis, consider setting up a direct debit. This helps pad out your credit history and shows lenders you’re capable of committing to regular monthly payments.

Car finance made easy for young drivers

Whether you’ve passed first-time in your late teens or you’re a twenty-something ready to upgrade your car, My Car Credit aims to make it easy to find car finance for young drivers from all backgrounds. Ready to get your application rolling? Reach out to our team by email on enquiries@mycarcredit.co.uk or give us a call on 01246 458 810 to find out more car finance for young drivers.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Car Finance: A Complete Guide

Will I Get Accepted for Car Finance?

What to Do If You Can’t Pay Car Finance Because of COVID-19

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

affordability car finance options credit score Jan24 young drivers

Should I Lease or Finance a Car?

Choosing between leasing or financing a car will depend on your needs and circumstances. In both instances, you’ll be able to use a vehicle as you pay a series of pre-determined monthly instalments – but the main difference between leasing and financing a car is whether or not you end up the vehicle’s owner.

As such, there’s no right or wrong answer to the question of whether you should lease or finance a car – it’s all about your priorities. Read on to find out more.

Car leasing and car financing – what’s the difference?

Leasing and financing a car may sound similar, but they do have key differences.

The main difference between leasing and financing a car is ownership. When you lease a vehicle, you’re essentially borrowing the vehicle from a dealer for a specified period of time – usually anywhere from 12 months up to 60 months. You’ll pay a monthly fixed amount which usually includes service and maintenance fees. At the end of the lease’s term, you hand the car back – you’re never its owner.

With car financing, however, you have the option of owning the car at the end of your finance term. Much like leasing, you’re making a series of fixed monthly repayments over a pre-agreed time period, after which time you have the option of making a final payment, making you the car’s legal owner.

Buying a car outright is the other option when buying a car – but you need savings or a personal loan in order to finance this.

Should you lease or finance a car?

As with anything, whether or not leasing or financing a car is most appropriate for you will depend on your priorities and preferences.

Leasing a car – the advantages

When you lease a car, your monthly repayment amount will typically cover service and maintenance costs.
As you are never the vehicle’s owner, you don’t have to worry about the car depreciating in value over time.
If you like to change your car frequently, leasing is a far more appealing option.
Because you won’t own the vehicle, you also don’t have to worry about reselling it at the end of the lease term.
If you use your car for business purposes, you may benefit from greater tax write-offs with a lease (unless it’s a luxury vehicle).

Leasing a car – the disadvantages

There’s usually a mileage limit for leased cars, and you do have to pay a penalty if you exceed this, so if you’re a driver of long distances, leasing may not be for you.
Although service and maintenance costs are covered, if you cause any serious damage to the vehicle, you may incur further charges.
You don’t ever own the vehicle.
You may also incur charges if you want to end the lease deal early.

Financing a car – the advantages

Car financing tends to be more flexible than leasing a car. Similar to leasing, you can use the length of the agreement, and you may be able to decide on an annual mileage limit and deposit amount.
Car finance is typically available on both new and used cars, whereas leasing is only available for the newest vehicles.
If you’re after the lowest possible monthly repayments, car finance on a used car is the best option.
At the end of car finance, you’ll own the car. Depending on which finance you’ve gone for, you may need to make a final payment, after which you are the car’s legal owner.

Financing a car – the disadvantages

With PCP finance, you can choose whether or not you want to own the car at the close of your deal. However, as with leasing, if you opt to return the car, but have exceeded the mileage limit or caused excessive damage to the car, you will incur extra charges.
You are locked into a repayment schedule, so you need to ensure that your financial circumstances aren’t likely to change whilst you’re repaying your car finance. Missed repayments will affect your credit score – though there are ways of securing car finance even with a poor credit rating.

Talk to us about car financing and leasing

If you still have questions about whether car finance or a car lease is best for you, get in contact with My Car Credit on 01246 458 810 or email enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

What Happens if I Can’t Pay My Balloon Payment?

Car Finance for First Time Drivers: A Beginner’s Guide

No Deposit Car Finance – How Does it Work?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance calculator car finance options car lease Jan24 leasing

What’s the Cheapest Way to Finance a Car?

Car finance is an accessible way to purchase a vehicle. Whether you’re after a new or nearly new vehicle, there are various different kinds of car finance that can help you drive off into the sunset with minimal stress. In this post, we’ll explore them in a little more detail to determine the cheapest way to finance a car.

Financing a car – the cheapest options in the UK

Purchasing the vehicle itself is likely to be the steepest cost, but you should also consider other costs like running and maintenance fees, as well as any interest rates or other costs you may be required to pay. Here are the basics on each method of financing a car.

Cash

The cheapest way to finance a car is with one up-front payment. As a cash buyer, you’re able to fund the entire cost of the car immediately, meaning that you’ll own the vehicle outright. Being a cash buyer means you’re invulnerable to any interest rates, monthly loan repayments, or having to repay more on a finance agreement than the car is worth. You can also sell the car at any time.

However, you do have to be able to fork out what the car is worth in one go – which is a lot more than most individuals can afford. It also means you are entirely responsible for any servicing and maintenance costs.

Personal loans

Personal loan rates are nearing an all-time low, and are therefore the next cheapest way to finance a car after cash purchases. With personal loans – or unsecured loans – you’ll borrow a fixed sum which you’ll repay over a pre-determined amount of time (usually one to seven years) and will also pay interest at the same time.

If you have a good credit score, personal loans can be secured with relative ease, and by shopping around and comparing the APR, you can secure a competitive rate. You’ll be the legal owner of the vehicle, so can sell it whenever you want, but monthly repayments of a personal loan can be higher than with alternative car finance.

Finding the cheapest car finance

If neither of the above are viable options for you, there are alternative ways to get a car finance quote and secure a deal that suits you to save money. Be aware that you will likely receive better deals and cheaper monthly payments if you have a good credit score, but you can find a car finance company that will still accept you if your score is less than ideal.

Below we’ll run through three car finance options that are popular in the UK.

Hire purchase agreements (HP)

If you’re struggling to get a cheap personal loan, a hire purchase agreement may be for you. You won’t own the vehicle until you’ve made the final repayment – the car is used as an asset against the loan. As such, if you fail to make your repayments, the lender has the right to repossess the vehicle. A hire purchase differs from other options in this way.

You’ll typically make a deposit of around 10% (although there are no-deposit options) and from then on, you’ll have a series of pre-determined monthly repayments. These can, depending on the agreement, be low monthly payments. If you want to own the car outright at the end of the term, a HP agreement is a good route to take. Repayment terms are flexible, you’ll often be offered competitive fixed interest rates, there aren’t usually any mileage caps, and a hire purchase agreement is easier to be approved for than other car finance.

Personal contract purchase (PCP)

Personal contract purchase is another popular car finance option. If you’re hunting for the cheapest way to finance a car outright, PCP might not suit. But if you’re a fan of chopping and changing vehicles, this option is ideal.

PCP finance deals often have low deposits as well as flexible repayment terms with low monthly payments. That’s because you only cover the cost of a car’s depreciation, plus interest, when paying the finance company each month.

PCP explained

You can choose to own the car at the end of the finance term, in which case you’ll make one final payment. This lump sum is known as the balloon payment, often much larger than your other monthly payments. If you don’t make the final balloon payment, you can simply hand the car back to the dealer with the option of upgrading to another new car.

The key difference here is that lenders know they might be getting the car back. As a result, it’s common for them to impose mileage limits on cars to protect them from excess depreciation in their value. Limits are typically between 5,000 to 10,000 miles per year with additional payments for anything over the agreed amount.

Bear in mind that, although the monthly repayments for PCP can be lower than HP, you’ll often end up paying more overall if you want to buy the vehicle outright. If you exceed a mileage cap or cause wear and tear, you’ll also have to cough up.

Personal contract hire (PCH)

PCH is a way of leasing the vehicle – it’s essentially a long-term rental. Servicing and maintenance fees are included, though you may have to pay for car insurance and road tax separately.

There’s a mileage cap as well as an initial deposit. In many cases, PCH can work out cheaper overall than PCP as you don’t have any option to purchase the car.

With PCH leasing, you hand the car back to the dealer at the end of your finance term. Your repayments are fixed, but payment terms are flexible and you can generally change providers.

How to reduce your monthly payments

Make a larger deposit

A simple way to reduce your loan is by making a larger deposit. This cuts the amount you need to borrow, meaning less money is being spread across the agreement term. It will also minimise the amount of interest you owe your lender.

A larger downpayment also provides more security to the lender, which could get you a better rate on your loan.

Avoid all-inclusive deals

There’s no doubt about it. Paying one amount for your car makes life easier. With some providers, you can pay a single amount for the car, loan, insurance, tax, servicing, maintenance – the lot. However, you’re often charged a premium for the convenience.

If your budget is tight, you’ll typically get a better deal by arranging everything yourself. That means finding your own insurance, paying for tax and keeping up to date with servicing and maintenance to keep the car in a good condition.

Decide what you want earlier

Flexibility is a buzzword when it comes to car finance. But it does come at a cost. PCP deals offer the most flexibility as you get to decide whether or not to actually purchase the car at the end of the deal – having driven it for a few years.

If possible, it could work in your favour to make this decision before starting a loan. If you don’t want to own the car, PCH may be cheaper than PCP. If you do want to own the car, HP is often the cheapest way to pay.

Improve your credit score

Credit scores give lenders an idea of how much risk is involved in a car finance application. If all your bills are fully paid on time and you have a history of lending responsibly, you present less risk, so you could access better deals at a lower overall cost.

Take a look at our article on improving your credit score for more information.

Shop around

Last but not least, it always pays to shop around. Getting a loan or finance is no exception. Whether it’s with the bank or a specialist lender, you should never settle for the first deal you’re offered. Car finance brokers make this easier by comparing lots of deals without you having to jump through hoops over and over again.

Easily navigate the car finance market

Searching the car finance market and securing affordable car finance can feel overwhelming – but it doesn’t have to be. My Car Credit has hundreds of helpful blogs and articles for you to browse through. We also have a large network of trusted lenders to help you find the cheapest way to finance a car for your requirements. try our online car finance calculator to get the ball rolling.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Best Car for Commuting: 10 Top Picks

10 Most Popular Cars in 2023

What is the Best Car for Boot Space?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options cash cheapest hire purchase Jan24 pch PCP personal loan

What Credit Score is Needed for UK Car Finance?

Your credit score is one of the most important tools used by lenders to assess car loan applications. So, what credit score is needed for UK car finance? There’s no black-and-white answer, however, there is a lot to learn when it comes to credit scores.

Your credit score is one of the most important tools used by lenders to assess car finance applications.

As to the question of what credit score is needed for UK car finance, there’s no hard and fast answer because different car finance lenders have their own requirements.

While there’s generally no universal minimum score you need to secure car finance, your credit report will nonetheless impact your eligibility and the kinds of rates you’ll be offered. The higher your credit score, the better terms and rates you’ll benefit from.

As such, it’s sensible to compare your options with different lenders and improve your credit before applying – read on to find out more.

Understanding credit scores and their impact on car finance

A credit score is a three-digit number that reflects your reliability and trustworthiness as a borrower based on your history of credit management and use. The range of credit scores varies from ‘excellent’ to ‘very poor’.

Lenders will use your credit score to evaluate your risk as a lender. The higher your score, the better the terms and rates you’ll benefit from, and you’ll likely be eligible with a wider panel of lenders.

Your credit score is calculated based on several factors. These include payment history, the percentage of your credit you’re using, the length of your credit history, and the number of ‘hard’ credit checks on your account.

The ‘big three’ UK credit reference agencies

In the UK, most lenders use three main CRAs (credit reference agencies) to vet applicants. Each agency has its own scale that it uses to assess individuals and assign them a credit score. They also have their own custom eligibility criteria which will factor into your car finance eligibility.

Credit scoring ranges from ‘very poor’ to ‘excellent’. Most people will fall in the ‘fair’, ‘good’, or ‘excellent’ range. Anything below ‘fair’ is considered ‘poor’ and will impact the car finance rates and terms you’ll be offered.

The three main CRAs in the UK use the following credit score ratings:

	Equifax	TransUnion	Experian
Excellent	811+	628-710	961-999
Very Good	740-799	NA	NA
Good	531-670	604-627	881-960
Poor	0-438	551-565	561-720

What credit score is needed for car finance in the UK?

You can assume that your credit score rating means the following:

Excellent: You’re considered a low-risk borrower and will access the best rates and deals

Good/fair: You’ll be considered less risky than those with poor credit and will benefit from competitive rates

Poor: Your options will be more limited, but it’s still possible to secure poor credit car finance

Remember that each lender will have their own eligibility criteria beyond your credit score. For example, some lenders may prioritise proof of income, whereas others place more weight on your debt-to-income ratio.

Other factors that influence car finance approval

Your credit score is critical to determining your car finance eligibility.

That said, there are other factors that will also influence your likelihood of approval, including:

Deposit size: A larger deposit (also known as a down payment) reduces the overall loan amount, which can lower your interest rate and make you a more attractive loan candidate.

Loan term: The longer the loan term, the higher the interest rate you can face because longer loans are riskier to lenders.

Debt-to-income ratio: This measures how much debt you owe compared to your income. The higher the ratio, the riskier you are to a lender.

Stability of income and employment status: Younger applicants are riskier than those with established, stable incomes. Equally, lenders will want to check that your income matches the payments going into your account.

Can you get car finance with a low credit score?

If your credit report is less than perfect, don’t panic. It’s more than possible to secure car finance with poor credit.

Brokers like My Car Credit can help you secure favourable deals even if your credit report isn’t at its best.

We combine a wide panel of trusted lenders with a sensible approach to help you find the right agreement for your circumstances. Our tailored approach means that we may even be able to approve you for car finance where others haven’t.

That said, there are easy ways to check and improve your credit score.

How to check and improve your credit score

You can ask any of the CRAs we mentioned above for a copy of your credit report. This allows you to check your score via a soft credit check.

A soft credit check doesn’t leave a mark on your credit report. They’re only visible to you (the applicant), remaining invisible to lenders and third parties. Remember that if you choose to advance your finance application, your credit report will typically be subject to a hard search, which will leave a mark.

There are plenty of ways to improve your credit score. Some of the best strategies for improving your credit score include:

Registering on the electoral roll: Lenders will check this to check that you are who you say you are, protecting themselves against fraud.
Making timely payments: Lenders want to know you’re capable of responsibly managing your credit, and making timely payments helps to prove this.
Reducing your credit utilisation: Spread your payments across your accounts, as this process shows you know how to manage your money.
Avoiding multiple hard credit checks: Hard credit checks leave a mark on your report, and too many of them won’t be looked on favourably by lenders.

How does my credit score affect my car finance application?

Your credit score will impact your car finance application in several ways. For one, the higher your credit score, the better your eligibility for more favourable rates and terms. In other words, you can expect lower interest rates with higher credit scores.

Applicants with higher credit scores may also benefit from better loan amounts and terms, and may be able to access a broader panel of lenders. This affords more options when shopping around for a favourable, tailored car finance loan.

The role of My Car Credit in securing car finance

As part of Evolution Funding, the UK’s largest motor finance and technology provider, My Car Credit has access to the largest panel of car finance lenders nationwide.

This means we can offer personalised support to borrowers, leveraging our expertise, lender network and award-winning technology to find the right car finance for your needs and circumstances. Our goal is to help you buy the car you want at the budget you can afford.

Use our car finance calculator to assess your car finance eligibility. You’ll receive a no-obligation quote in minutes, giving you a breakdown of your expected monthly payments, typical interest rates, and total payable.

If you’re unsure about the kind of car finance that might work best for you, contact our friendly team of Car Credit Specialists today.

Frequently asked questions

Can I get car finance with no credit history?

At My Car Credit, we consider applications from drivers of all circumstances. Whether you’re a first-time motorist, self-employed, or have a poor credit rating for different reasons, we can work with you to secure car finance that accommodates your circumstances.

Will checking my credit score lower it?

Checking your credit score won’t lower it. In fact, it’s sensible to regularly check your report for free so that you can establish whether there are any potentially harmful errors that need rectifying. Plus, regularly checking your score means you’re more likely to be upfront with lenders from the get-go, reducing the risk of rejection further down the line.

Does car finance improve credit score?

Repaying your car finance in full and on time can help to improve your credit score in the long run. This can improve your eligibility for future loans, as you’ll be seen as a more reliable, less risky borrower.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Car Finance with Fair Credit: What You Need to Know

Is Car Finance Good for my Credit Rating?

Why Was I Denied a Car Loan with Good Credit?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance check car finance options credit score equifax experian Jan24 TransUnion

Advantages and Disadvantages of PCP Car Finance

Roughly nine in 10 of all new cars sold in the UK are purchased using finance, with personal contract purchase (PCP) loans accounting for a significant portion of sales, according to the latest data from the Finance and Leasing Association (FLA). With attractive interest rates, long repayment terms and the opportunity to get behind the wheel of your dream car faster, it’s no surprise PCP is one of the most popular car finance options in the UK.

Of course, it’s important to factor in your unique situation and develop an in-depth understanding of PCP loans before you commit. This guide is designed to help you understand all the advantages and disadvantages of PCP car finance. Armed with knowledge, you’ll be able to make an informed and educated decision about whether a PCP loan is right for you.

What is a PCP loan?

Before we get stuck into the advantages and disadvantages of PCP car finance, let’s take a moment to define what personal contract purchase means. The term describes a type of loan that sees you put down an initial deposit on a car (although there are no-deposit options), and then continue to make repayments.

It builds on the concept of hire purchase agreements and includes the option to purchase the car outright at the end of the loan. The main difference is that the final resale value of the vehicle is calculated at the beginning of the loan. This figure is known as the Guaranteed Minimum Future Value (GMFV) and is assessed using several factors, including the age of the car at the end of the loan, and expected mileage.

Most PCP loans start with a deposit of around 10% though this can vary depending on the lender, your credit rating and the unique terms and conditions of your contract. After making an initial deposit you’ll continue to pay monthly instalments plus interest over the lifetime of the loan. Most PCP loans span for two to four years – though again, this can vary.

When your loan ends and all instalments have been paid, you have the option to purchase the vehicle outright by making a balloon payment. The value of the balloon payment is calculated using the GMFV agreed on at the beginning of the loan. Alternatively, you can choose to return the car and start another PCP loan, which gets you behind the wheel of a new model. If the vehicle is worth less than the GMFV, you will need to pay the difference when returning the car.

Now you know more about the specifics of personal contract purchase, let’s take a look at the advantages and disadvantages of PCP car finance.

Advantages of PCP car finance:

Upgrade to a new car frequently

PCP loans usually span for two to four years and offer the option to roll on to a new contract after the final instalment has been made. Many motorists choose this option as it’s an easy and affordable way to regularly upgrade your car.

Low fixed monthly payments

The fixed monthly payments of PCP loans are generally lower than hire purchase (HP) contracts. This makes PCP loans an attractive option if you’re on a strict monthly budget.

Affordable deposits

As well as low fixed monthly payments, PCP loans require small deposits, often as low as 10%. Our car loan affordability calculator makes it easy to get an idea of how far your deposit will go.

Flexible options

Flexibility is one of the biggest advantages of PCP loans. Depending on the GMFV agreed on at the start of your loan, you can choose to roll over to a new PCP loan, make a balloon payment to own the car outright or simply hand back the keys with no more to pay. If you love the idea of flexibility and aren’t sure if you want to keep the car or return it at the end of the contract, PCP loans are a great option.

Finance secured against the car

Unlike other finance options, PCP loans are secured against the value of the car. This means you don’t have to rely on other assets like a home or cash investments.

Stretch your budget

With deposits as low as 10% and affordable monthly repayments, PCP loans stretch your budget much further than if you were to purchase a car with cash alone. This allows you to expand your search and consider cars that are newer or higher spec. In the long run, this can unlock big savings. For example, a PCP loan may mean you can afford a car with better mileage, which will significantly reduce your petrol expenses. Similarly, upgrading to a newer car with a PCP loan can slash maintenance and servicing costs.

Disadvantages of PCP car finance:

Capped mileage

Most PCP loans feature mileage caps written into the contract. This is because mileage can have a big impact on the value of a car. If you exceed the mileage cap used to calculate the GMFV at the start of your loan you could face extra charges. These may be applied whether you choose to return the car or purchase it via a balloon payment. Excess mileage penalties can be expensive and add a significant percentage to the total cost of your loan. To avoid nasty surprises at the end of your loan, it’s important to be realistic about your expected mileage when calculating GMFV.

Limits on wear and tear

Normal wear and tear is fine but if you plan to put your car through its paces on 4WD tracks or transport muddy pets on a regular basis, PCP loans can be a little restricting. Any damage that exceeds normal wear and tear can also see charges added to your final instalment or balloon payment.

Find out more about PCP car finance

Considering PCP car finance for your next ride? Our experienced team is always available to talk you through the advantages and disadvantages of PCP car finance. Get in touch by email or give us a call on 01246 458 810 to find out more.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

What to Do If You Can’t Pay Car Finance Because of COVID-19

Electric Car: Lease vs Buy – Which is Best?

PCP: Is It Worth It?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options PCP personal contract purchase

What are the Advantages and Disadvantages of Financing a Car?

Hurdles like the global semiconductor chip shortage and economic instability haven’t shackled the consumer car finance market, with the latest data from the Finance and Leasing Association (FLA) revealing more than 2 million cars were purchased using finance options like personal contract purchase (PCP) and personal contract hire (PCH) in 2021.

Over the year, FLA lenders distributed more than £37 billion in car finance loans, helping Brits get behind the wheels of everything from the latest Teslas to second-hand Minis.

Of course, like any loan it’s important to have a good understanding of exactly what you’re committing to when taking out car finance. This means taking the time to understand the advantages and disadvantages of financing a car. Want to know more? Read on as we answer all your questions about the advantages and disadvantages of financing a car, with a goal to help you make educated decisions.

Advantages of financing a car

You can stretch your budget further

When considering the advantages and disadvantages of financing a car, budget is one of the biggest factors. Instead of scraping together cash to purchase a car outright, car finance options such as PCP and PCH allow you to stretch your budget much further. Initial deposits can be as low as 10% (with plenty of no-deposit options too) and allow you to spread out the rest of your loan over a period of two to four years, sometimes longer.

Fixed monthly payments

Most car finance loans include fixed monthly payments which make budgeting easy. You’ll know exactly how much will be coming out your bank account each month, making it easy to stay on top of your loan.

Options for every credit score

Unlike mortgages and credit cards, car finance is available to most Brits. Even if your credit score is less than ideal, it’s still possible to secure loans with great terms, conditions, and interest rates. Find out more in our complete guide to car finance with a poor credit rating.

Disadvantages of financing a car

You may be subject to mileage limits

Car finance loans often include mileage caps which can restrict how you use your car. These are common with PCP agreements, where you have the option to return the car to the lender at the end of the loan. If you want total freedom when it comes to mileage, car finance options like hire purchase (HP) can be a good alternative.

You don’t necessarily own the car outright

Many car finance loans use the vehicle as security, meaning you don’t own the car outright until you’ve paid all instalments. You may also need to settle extra costs such as balloon payments or penalties for extra mileage. For many motorists, this is one of the biggest disadvantages of financing a car.

Excess wear and tear can result in penalties

As well as penalties for exceeding your mileage limit, some car finance loans will add fees for wear and tear. Everyday wear and tear is fine but anything abnormal can incur fees. This can include anything from dents and scratches to ripped seat covers.

Tips for securing the best type of car finance

No matter what type of car you’re in the market for or the state of your finances, it’s important to understand a few key points when researching the advantages and disadvantages of financing a car.

APR

First, you’ll need to understand annual percentage rate (APR). This is the interest rate you’ll pay over the lifetime of the loan. APR can vary significantly between lenders and is also impacted by factors like your credit score and deposit. Without a good rate, APR can be one of the biggest disadvantages of financing a car. That’s why it’s so important to shop around for the best deals!

Hidden fees

As a borrower, it’s your responsibility to gain a complete understanding of all fees and charges associated with your loan. Most lenders are relatively transparent, but it always pays to ask questions and do your homework. This is the best way to sign on the dotted line with confidence and ensure you don’t encounter any unwelcome surprises down the line.

Keep the big picture in mind

Rock bottom interest rates and ultra-low monthly payments are tempting but it’s important to keep the big picture in mind when it comes to car finance. Use variables like APR and repayment terms to calculate the total cost of your loan and paint a long-term picture of the advantages and disadvantages of financing a car. Generally, longer loans mean you’ll rack up more interest and ultimately, pay more for your car.

Ask for extras

If you don’t ask, you don’t get! For example, it’s not unusual for dealers to throw in free servicing for 12 months or extras like leather seats, roof racks or an upgraded sound system when selling new cars. Similarly, just because you’re purchasing a car on finance doesn’t mean you can’t push for a discount on the advertised price of the car. Of course, there are no guarantees but if you approach the situation with a smile and a good attitude, chances are it’ll pay off.

Enlist the help of a broker

There’s no shortage of car finance lenders in the UK and like all industries, some are legions better than others. Enlisting the help of a broker can help you sift through the options and secure the best deals.

With access to the largest panel of car finance lenders in the UK, My Car Credit matches you with the best loan based on your unique borrower profile. This personalised approach boosts your chances of success and helps secure you the best type of car finance. Connecting with a broker can also help you understand more about the advantages and disadvantages of financing a car and ultimately, make better choices.

Want to know more about the advantages and disadvantages of financing a car? We’re always available to answer questions via email or give us a call on 01246 458 810 to chat with one of our car credit advisors.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

How Does Car Finance Work in the UK?

HP, Conditional, PCP: The Lowdown on Car Finance Options

Will I Get Accepted for Car Finance?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options Jan24

6 Types of Car Finance in the UK

Car finance is one of the most popular ways to purchase vehicles in the UK, with Brits pouncing on benefits like low interest rates, affordable monthly repayments and flexible terms. While all types of UK car finance are designed to get you behind the wheel of a new car faster, there are some important differences to understand before you commit to a contract. With a good grasp on car finance options in the UK, you can get the most out of your loan and enjoy all the benefits, with zero stress.

1. Hire Purchase to Own a Car Outright

Hire purchase (HP) is one of the simplest UK car finance types.

What happens with hire purchase?

HP allows you to spread the cost of the vehicle over a set period of time, with repayments usually made monthly. At the end of the hire purchase agreement, you’ll own the car outright, with nothing more to pay. Deposits aren’t always required, though they can help reduce your interest rate and monthly payments.

Hire purchase costs and terms

To calculate the total cost of your hire purchase agreement, simply take the price of the car, minus the deposit and add interest. You may also be liable for administration and transfer rights fees at the end of the loan, which are worth factoring in. Most hire purchase agreements span for between three to five years, although this can vary. Monthly payments are fixed, making it easy to budget and plan around your loan.

2. Conditional Sale Car Finance Agreement

Similar to a HP agreement, conditional sale loans are a great option if you want to own your car outright at the end of the contract.

What to expect from a conditional sale

Fixed monthly payments are a little higher though there are no additional fees at the end of the agreement. Deposits are usually 10% of the car’s value and repayment terms can be anywhere from two to six years, allowing for plenty of flexibility for a brand-new car.

Conditional sale vs hire purchase

What’s the difference between hire purchase (HP) and a conditional sale? Sometimes, the terms are used interchangeably. However, conditional sales specifically include a condition that you don’t own the vehicle until the final instalment has been paid. That means your lender can repossess your car if you fall behind with payments. This condition may also be included on HP car finance agreements though.

3. Personal Contract Purchase

Personal contract purchase (PCP) is one of the most popular types of UK car finance options and for good reason.

Understanding personal contract purchase

Fixed monthly repayments are lower than HP loans, which allows you to consider newer, higher-spec vehicles without blowing the budget. You may need to make an initial deposit worth around 10% of the car’s value, and then you’ll continue to make repayments over the lifetime of the loan, usually between two and four years.

Balloon payments on PCP deals

When you’ve made your final instalment, you have the option to make a ‘balloon payment’ to gain ownership of the vehicle. The balloon payment is a final payment which covers the minimum future value of the car at the end of the PCP agreement. Another way of looking at it is that your monthly payments cover the car’s depreciation in value, while the final balloon payment covers the actual cost of the vehicle.

Alternatively, you can opt out of the large, lump sum payment. This will end your personal contract purchase (PCP) agreement, so you’re free to find a car elsewhere. However, you can also start a new PCP deal and swap the car for a new model, making PCP loans popular with motorists who like to change cars for the latest bells and whistles.

Guaranteed Future Value explained

Most PCP loans require you to estimate your expected annual mileage, which is used to calculate Guaranteed Future Value (GFV). This figure predicts the value of the car at the end of the loan based on a maximum annual mileage allowance. Without a mileage limit, it’s hard to predict how a car loses value as the same car would be worth a significantly different amount if it has been driven 50,000 miles or 15,000 miles, for example. As such, if you go over your pre-agreed mileage limit you may incur penalty charges as this reduces the guaranteed minimum future value.

4. Personal Loan

Few major purchases cost as much as a car, so it’s no surprise that a personal loan is another option to cover your payment to a car dealer or private seller.

Getting a personal loan to finance a car

Personal loans see you borrow the total amount needed to purchase a car, then pay back a fixed amount in monthly instalments. You’ll also have to pay interest on the amount borrowed, based on an annual percentage rate.

Advantages of a personal loan

You’ll own the vehicle outright, which makes a personal loan appealing to motorists who want complete freedom when it comes to mileage, wear and tear, customisation and other liberties. You’re also free to sell the car at any time with a personal loan. Borrowers with good credit profiles can generally unlock the best interest rates and personal loan terms.

5. Guarantor Loan

For borrowers with a bad credit history, guarantor loans are one of the most appealing car finance types in the UK.

How guarantor loans work

A third party, usually a family member, agrees to ‘guarantee’ the personal loan or car finance with a bank, finance company or car dealership and step up if you can’t make monthly payments. It’s a big responsibility for both you and the guarantor and so shouldn’t be entered into lightly.

How does it differ from a personal loan?

This carries many of the same benefits as a personal loan, depending on who you’re borrowing from. A guarantor loan from a bank means the vehicle is fully paid, so you can make customisations or even sell it if needed. Bear in mind that your guarantor’s credit rating may also come into play when applying for this type of personal loan or finance.

6. Personal Contract Hire (PCH)

Also known as leasing or a lease agreement, personal contract hire allows you to rent a vehicle for the lifetime of the agreement.

How does personal contract hire work?

Contracts start with an initial cash deposit followed by low monthly payments to cover the cost of the lease. The value of your monthly payments is determined using your expected annual mileage and the length of your lease. This is because both variables play a big role in the value of the vehicle at the end of your contract.

What happens at the end of your PCH deal?

At the end of the agreement, you return the car to the dealer, with no option to purchase it outright. Most people choose to start a new PCH contract, which gets you the keys to a brand-new vehicle. If you love fresh leather seats, cutting-edge technology and that sought-after new car smell, you’ll love PCH loans.

Added benefits of PCH

You’ll also sidestep depreciation, as well as enjoy perks like breakdown cover, waived road tax and complete coverage under the manufacturer’s warranty. For legions of motorists, the hassle-free nature of PCH makes it one of the most desirable UK car finance types.

Beware the mileage limits

As you might expect, PCH deals come with strict mileage limits. That’s because this car finance option doesn’t include the option to purchase, so the vehicle will be returned at the end of your car loan. If you exceed your mileage allowance, you’ll need to pay additional charges to cover the unexpected depreciation to the car’s value. That said, it is still one of the most popular finance methods.

What’s the best type of car finance for you?

When you’re choosing between different car finance options, there are a few things to bear in mind.

Your credit rating

Firstly, your credit rating. If you don’t have a good credit score, you may struggle to get approved for personal loans. That means you’ll need to opt for one of the other forms of car finance.

Instead of an unsecured loan, drivers with a poor credit history can opt for PCP finance, hire purchase and conditional sale car finance deals. These are classed as secured loans because the vehicle is an asset for the finance company. In other words, it can be repossessed in exchange for outstanding finance.

Balloon payments

Another big consideration is the balloon payment. You may know already that you don’t want to own your next car outright. If that’s the case, it’s worth considering personal leasing as this could reduce your monthly costs for new car finance.

On the other hand, if you definitely do want to own the car outright, stick to HP or a conditional sale. An optional balloon payment offers you maximum flexibility, but can affect the way your finance company calculates your car finance deal. While monthly payments tend to be lower for PCP, the final payment is harder to factor into your finances than a manageable monthly payment. In contrast, a hire purchase repayment plan factors in the full value of the car from the outset.

Extra charges for car finance

Finally, there are extra charges. If you want to avoid paying more for high mileage, a hire purchase agreement or personal loan may be the best route. That said, you can find PCP and leasing deals with higher mileage allowances to suit your requirements.

Crunching the Numbers

Whether you’re attracted to the freedom and flexibility of hire purchase or love the idea of continually upgrading to new vehicles with a PCH contract, it’s important to crunch your numbers before committing to a finance agreement.

Up-front affordability

Firstly, there’s your up-front affordability. Bear in mind that a larger deposit can increase the likelihood of approval and potentially help you secure a better interest rate. You may also be able to use your old car for part-exchange with some dealers, which works as a type of deposit or addition to the amount you’re paying.

Car finance terms

Your initial cash deposit isn’t the only factor to consider when asking can I afford to buy a car? Financial factors like your credit score and borrowing history can influence how much lenders are willing to offer and the fixed interest rate available. You’ll also need to factor in variables like your preferred loan term, your budget for monthly repayments and the car’s purchase fee. Our car finance calculator can give you a better idea of the amount you’ll be paying based on your loan amount, repayment term and credit rating.

Future plans

Try to think about any plans you have over the agreed period. Can you continue to pay for car finance for 36 months or do you plan to move house in the next couple of years, for example.

Insurance for your financed car

It’s also worth noting that insurance is not included in most car finance agreements. As the registered keeper, you will need to arrange insurance for the duration of your car finance agreement, and afterwards if you’re paying the full value of the car. Car insurance is a significant cost to take on and may require you to opt for a cheaper vehicle to make car finance work for your budget.

Choosing Between Car Finance Types (UK)

With a good understanding of the different types of car finance in the UK, you can choose the best options for your unique situation. It’s always good to have experts on your team, which is where My Car Credit comes in.

As a car finance broker, we compare deals from a large panel of trusted lenders, so you don’t have to spend hours shopping around. Apply for car finance today using our online form and let us find the right deal for you without all the legwork.

Armed with a wealth of knowledge and experience, plus access to one of the largest panels of lenders in the UK, we help you narrow down your search and secure suitable loan terms and interest rates.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Is There a Maximum Age Limit for Car Finance?

No Deposit Car Finance – How Does it Work?

How Long Does It Take to Buy a Car?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance options Jan24

When you’re financing a car, it’s important to compare all of your options to find what’s best for you. One of the options available is CS car finance – but not everyone is familiar with what it means and how it works. Read on as we outline what CS car finance is.

CS car finance explained

Car finance made easy

Rates from 9.9% APR. Representative APR 10.9%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

Car finance with a provisional licence

Talk to our car finance experts

Rates from 9.9% APR. Representative APR 10.9%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

Car finance can be a fantastic way to secure the keys to your dream ride. However, it’s not uncommon to be refused the first time around. There are all kinds of reasons why you may have been refused car finance, some easy to overcome and others a little more complicated.

Step 1: Understanding why you were refused car finance

Step 2: Enlisting the help of experts

Step 3: Improve your chances of a car finance agreement

Securing car finance with poor credit history

Rates from 9.9% APR. Representative APR 10.9%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

Expand your horizons with a large lending panel

Choose an affordable vehicle

Consider ‘black box’ insurance

Take advantage of young driver incentives

Tips to boost your credit score as a young driver

Car finance made easy for young drivers

Rates from 9.9% APR. Representative APR 10.9%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

Car leasing and car financing – what’s the difference?

Should you lease or finance a car?

Talk to us about car financing and leasing

Rates from 9.9% APR. Representative APR 10.9%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

Financing a car – the cheapest options in the UK

Cash

Personal loans

Finding the cheapest car finance

Hire purchase agreements (HP)

Personal contract purchase (PCP)

PCP explained

Personal contract hire (PCH)

How to reduce your monthly payments

Make a larger deposit

Avoid all-inclusive deals

Decide what you want earlier

Improve your credit score

Shop around

Easily navigate the car finance market

Rates from 9.9% APR. Representative APR 10.9%

Related articles

Excellent

Good

Fair

Poor