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PCP vs HP – What’s the Difference Between Them?

When it comes to car finance, a standardised approach doesn’t always work. Every motorist is different, which is why lenders offer a variety of models, including personal contract purchase (PCP) and hire purchase (HP). Both are hugely popular in the UK and used to finance everything from budget-friendly hatchbacks to luxury EVs.

Each option offers unique benefits, so how do you decide which is right for you? In this comprehensive guide, we’ll cover everything you need to know about PCP vs HP, including how they work and the key differences between the two financing options.

Understanding the difference between HP and PCP finance

Let’s start with a breakdown of each financing option:

Personal contract purchase (PCP)

In a personal contract purchase agreement, the goal isn’t to own the car outright. Instead, you effectively rent it for a set period, typically two to four years. Your monthly payments cover the car’s depreciation over this period, as well as interest.

At the end of a PCP finance agreement, you have three choices:

Return the car
Trade in the car for a new model, moving into a new car finance agreement
Make a large balloon payment to buy the car outright

Balloon payments are lump sums agreed on at the start of your contract and calculated using the guaranteed minimum future value (GMFV) of the car. The minimum guaranteed future value indicates how much a car will be worth by the end of a PCP finance agreement. Making the final balloon payment means paying off this amount to own the car for good.

Hire purchase (HP)

Hire purchase is a more straightforward type of car finance and puts you on a direct path to owning the car outright. The total cost of the car, minus any deposit paid upfront, is spread over fixed monthly payments for a hire purchase agreement. Once you make the final payment, the car is yours to keep. There’s no need for a balloon payment at the end of the contract and you don’t have the option to return the vehicle. If ownership is your end goal, HP finance is a great option.

PCP vs HP: how the two compare

Now you know more about how each auto finance model works, let’s take a look at how they shape up against each other.

Ownership

PCP finance offers flexibility but stops short of ownership unless you’re willing to make a final balloon payment. As mentioned earlier, you can choose to return the car at the end of the agreement. This makes PCP an attractive option for motorists who love to upgrade to a new model every few years.

The option to own is an important difference between HP and PCP. Once the final payment is made on a HP agreement you become the legal owner of the vehicle. This makes HP finance ideal for motorists with long-term ownership goals.

Monthly payments

Lower monthly payments are one of the top benefits of PCP. They’re generally lower than HP payments as you’re covering the car’s depreciation, not its full value. This is due to the balloon payment, which covers the actual car cost should you want to buy outright.

Monthly payments are higher for HP agreements as you’re paying off the entire cost of the car, plus interest. You may prefer to save money with PCP finance compared to HP repayments and put money aside for the final lump sum.

Balloon payment

The need for a balloon payment at the end of a PCP agreement can catch some motorists off guard. As explained above, it covers the cost of the vehicle which isn’t included in PCP repayments. It is optional though, so you can choose to move to a new PCP finance deal with a car upgrade or just return the vehicle.

In comparison, monthly payments made on HP agreements are designed to cover the full cost of the car which means you won’t be hit with a lump sum at the end of your contract.

Mileage limits

PCP agreements often come with mileage restrictions, with additional charges incurred for exceeding your car’s mileage cap. The reasoning behind this is that the finance company wants to protect the value of new cars in case they’re returned at the end of the agreement. It’s well known that higher mileage means lower value, especially for newer cars.

Your mileage limit will typically be from 5,000 to 10,000 miles per year. This can make PCP limiting for high-mileage motorists. However, going over the agreed mileage limit doesn’t mean you can no longer use the car – it simply means you’ll pay extra charges (which will be outlined in your PCP agreement).

With HP, you’re free to drive as much as you like without worrying about mileage restrictions or penalties. That’s because, all being well, you will be the eventual owner of the car at the end of the HP finance term. For many motorists, this freedom makes the HP vs PCP decision easy.

Customisation options

Since you’re essentially leasing the car in a PCP agreement, there may be restrictions on customisations. That’s because the finance company may be getting the car back at the end of your term. It makes it harder for them to lease or sell it if it has custom features.

HP gives you the freedom to modify your vehicle. Whether it’s a custom paint job, tinted windows, tech upgrades or seating configuration, this is a big difference between HP and PCP. If you like to customise cars, hire purchase agreements are probably the car finance option for you.

Similarities between these two car finance options

While these two types of car finance have their differences, it’s worth noting the ways in which they’re similar too. These include:

Manageable monthly payments – Both PCP and HP finance make it more affordable to drive a new car, breaking down the cost into monthly repayments.

Term length – When comparing car finance options, PCP and HP finance both have similar repayment terms. You can typically expect to make monthly payments for 3-5 years, though shorter and longer deals are available.

Initial deposit – PCP and HP finance both require an initial deposit in most cases. This reduces the amount you’re borrowing which results in lower monthly payments. A smaller deposit will result in higher monthly instalments and could even affect the interest rate you’re offered.

New cars – Both of these options make it practical to drive a new car. Rather than facing one big lump sum, you’ll break the cost down into manageable monthly instalments. However, you can use PCP and HP for both new and used cars.

The bottom line on HP vs PCP

Ultimately, there’s no hard and fast answer when it comes to the PCP vs HP debate. What’s best for you depends on your individual preferences, financial situation and driving habits. PCP offers flexibility, affordability and options at the end of your contract, while HP prioritises ownership. Be sure to factor in your long-term plans when deciding and consider how each option aligns with your personal goals.

Need a hand deciding which option is right for you? At My Car Credit, we pride ourselves on offering friendly, personalised support to British motorists. This includes helping you understand the difference between HP and PCP. As well as PCP and HP, our team can get you up to speed on other popular car finance options, including conditional sale and personal contract hire (PCH).

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

What is a Conditional Sale for a Car?

While prices have dropped a little in 2023, the average cost of a new small car in the UK sits at more than £21,000. Opt for larger models and RRP increases significantly. Combined with issues like inflated petrol prices and the cost of living crisis, this figure puts car ownership out of reach of most motorists. With many Brits feeling the pinch, it’s no wonder auto finance options like conditional sale have surged in popularity over recent years.

There’s plenty to learn when it comes to car finance and conditional sale is one of many terms you may recognise. But what is a conditional sale exactly and how can it help you secure the keys to your dream car? Read on as we dissect everything you need to know about conditional sales, including how agreements work, the benefits and what to expect when signing a contract.

Understanding the basics of conditional sale

What is a conditional sale and how can it help you own your own car? The term describes a popular finance model that allows you to spread the cost of car ownership over a set time period, usually between two to five years. It’s essentially a personal loan that’s secured against the vehicle and funded by a lender. The finance provider pays for the car outright and maintains legal ownership of the vehicle for the duration of the contract.

As the borrower, you make regular repayments to the lender which cover the total cost of the car, plus interest accrued over time. After making your final payment, ownership of the vehicle is transferred to you. The model is straightforward and transparent, making conditional sale a great option for Brits who like to keep things simple. It offers a direct route to ownership without complications like mileage limits, wear and tear penalties or options to return the car or renew the contract at the end of the agreement.

Whether you’re looking at compact urban commuters like the Ford Fiesta or spacious, family-friendly SUVs like the Hyundai Tucson, Conditional Sale can be used to finance a huge range of makes and models. This flexibility is another key benefit associated with conditional sales.

Conditional sale vs hire purchase

What is a conditional sale agreement and how does it compare to hire purchase? If you’re familiar with the car finance landscape, you may draw comparisons with conditional sale and hire purchase (HP). And you’d be absolutely right. Conditional sale and HP share similarities and work in almost the same way, though there’s one major difference.

When a HP agreement winds up, you’ll need to pay a modest “option to purchase” fee to assume legal ownership of the vehicle. In comparison, conditional sale sees you automatically assume ownership after the final payment is made.

How conditional sale works

Now we’ve covered what a conditional sale agreement is, here’s a step-by-step breakdown of how the process works:

Choose your make and model

Like other auto finance options, conditional sale starts with choosing your dream car. Whether it’s a fresh out the showroom model or a used gem with low mileage and a great service history, conditional sale offers the flexibility to choose a vehicle that suits your personal budget, lifestyle and driving preferences.

Agree on terms

When you’ve chosen your new set of wheels, it’s time to agree on the terms of your conditional sale contract. This includes the duration of the agreement, along with your interest rate.

Make your deposit

Most conditional sale agreements start with an initial deposit designed to offset the total cost of the car. Keep in mind that your deposit can also help bring down your monthly payments and reduce the total amount of interest paid over the duration of the agreement.

Pay monthly instalments

The remaining balance of your car loan, minus your initial deposit, is split into fixed monthly payments. These payments cover both the principal loan amount as well as interest. For many Brits, the sense of financial stability that comes with conditional sale contracts is a major benefit.

Claim ownership

Unlike some auto finance options where you may have to return the vehicle or make a balloon payment at the end of the contract, conditional sale is all about easy ownership. After the final payment is made, you’re officially the legal owner of the car.

Why choose conditional sale?

Knowing what a conditional sale is gives you a few clues as to why it’s so popular with British motorists. Here’s a closer look at some of the top benefits:

A road to ownership

Ownership is the end goal of conditional sale contracts. Your payments cover the cost of the car which means you’re continually working towards ownership. There are no mileage restrictions, hidden costs or headache-inducing calculations to navigate. Instead, simply make your final payment and drive away as the legal owner of the vehicle.

No balloon payments

For many motorists the concept of balloon payments used in models like PCP can be frustrating. In contrast, conditional sale distributes the total cost of the car evenly over a pre-determined time period. This can make budgeting more predictable and means you’ll enjoy full ownership at the end of the lease.

Mileage flexibility

Conditional sale liberates you from the mileage caps that typically accompany PCP agreements. You’re free to drive as much as you like without worrying about breaking the terms of your contract and incurring penalties.

Customisation options

With full ownership, you have the freedom to modify your vehicle as you please. Whether it’s a unique paint job, upgraded tech or personalised accessories, the car is yours to customise.

Take the wheel with My Car Credit

Ready to get behind the wheel? My Car Credit can help you secure the best conditional sale deals, tailored to your personal needs. Our friendly team is here to answer all your questions about what a conditional sale is, provide guidance and ensure your road to car ownership is as smooth and stress-free as possible.

Looking for something different? At My Car Credit we specialise in matching clients with the best auto finance options for their needs. Every motorist is different which is why a one-size-fits-all approach never cuts it. Instead, we carefully assess every application to find the perfect match.

As well as conditional sale, we offer other popular car finance options like Hire Purchase (HP), Personal Contract Purchase (PCP) and Personal Contract Hire (PCH). It’s this open-minded approach, combined with access to a wide range of high street and non-traditional lenders, that gives us a competitive edge over other brokers.

Give us a call on 01246 458 810 to find out more or email us at enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Financing a Second-Hand Car: 4 Options

Am I eligible for car finance?

7 Advantages of Used Car Hire Purchase

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

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What is Hire Purchase? – Simple HP Explanation

Someone reseacrching what Hire Purchase is on a phone

Whether you’re eyeing a brand-new Nissan Qashqai or a used Volkswagen Golf, hire purchase (HP) is one of the most popular auto financing options in the UK, up there with personal contract purchase (PCP). The model allows you to spread out the cost of car ownership over time and secure the keys to your dream car, without hefty upfront costs.

You’ve probably come across the term when researching automotive finance options. But what is hire purchase exactly, and how does it pave the way to affordable, stress-free car ownership? In this guide, we’ll unpack everything you need to know about hire purchase, breaking down all the moving parts so you can navigate the auto finance landscape with confidence.

Hire purchase explanation

Hire purchase is a finance option that combines the benefits of car ownership with the practicality, affordability and predictability of structured payments. It’s one of the simplest types of auto finance and spreads out the cost of the car, plus interest, over a set period of time, usually between one to five years.

Think of it as a well-planned road trip. You get to enjoy the ride but instead of absorbing the entire journey cost upfront, it’s broken down into manageable pit stops, i.e. monthly payments.

How HP agreements work:

Choose your car

This is the fun part and involves researching vehicles, scheduling test drives and choosing your dream car. It’s always a good idea to crunch your number before you start the search to get an idea of how far your budget will stretch and what types of vehicles you can realistically consider.

Make an initial down payment

Most HP agreements start with a down payment, though this isn’t always essential. That said, it’s generally in your best interest to make an initial deposit as it will help bring down your total loan balance and minimise your monthly payments, as well as interest costs. If you already own a car, trade ins can be a great way to raise cash for a deposit.

Monthly instalments

After making a deposit, the remaining cost of the car is spread out across fixed monthly instalments. These payments cover both the cost of the car and interest applied by the lender.

Ownership

Unlike personal contract hire (PCH) where you hand back the keys at the end of the agreement, hire purchase steers you towards full ownership. Once the final payment is made, the car becomes yours outright.

Hire purchase explained: a closer look at the benefits

Easy, affordable and predictable, it’s no wonder HP is one of the most popular auto finance options in the UK. Here’s a little more information to help explain what hire purchase is and why the model wins over so many Brits:

Budget-friendly beginnings

Thanks to affordable down payments, hire purchase allows you to kickstart your car ownership journey without depleting your savings. This sets you up for success on the road to car ownership.

Predictable payments

Monthly HP instalments are fixed which makes budgeting easy. No surprise expenses, just predictable monthly payments.

A road to ownership

One of the top benefits of hire purchase is the option to own at the end of the agreement. After your contract has expired, the car is yours to keep.

Flexibility

Whether you’re eyeing a zippy commuter, sleek convertible or family-friendly SUV, hire purchase offers loads of flexibility when it comes to makes and models. You’re free to choose a vehicle that best suits your budget, lifestyle and driving preferences.

New or used

Can you use hire purchase for a used car? Absolutely! As well as the flexibility to choose different makes and models, HP agreements offer the freedom to finance new or used vehicles. Auto finance isn’t just for showroom cars. Analysts estimate a huge 1.5 million used cars were financed by British motorists in 2023, with agreements worth £23 billion. The trend is set to continue in 2024 as Brits continue to use HP agreements to fund used car purchases.

Factors to consider when opting for Hire Purchase

Now you know more about what hire purchase is and how the model works, let’s take a closer look at some important factors to consider before committing to an agreement.

Understand interest rates

Like any financial agreement, it’s important to understand the interest rates applied to your hire purchase deal. Over time they will have a big impact on the total cost of your loan.

Evaluate your budget

While hire purchase makes car ownership accessible, it’s essential to carefully evaluate your budget before committing. Crunch your numbers to ensure your monthly instalments align with your financial situation.

Check for early repayment options

Some HP agreements allow for early repayment, an option that can potentially reduce the overall cost of your loan.

Factor in depreciation

All cars depreciate over time and vehicles financed using HP are no exception. Be sure to factor this into your decision making process if the value of the car at the end of your HP agreement is important.

Start your journey to ownership with My Car Credit

If ownership is your ultimate goal, hire purchase could be your ticket to ride. As covered in our hire purchase explained guide, the format is easy to understand and offers lots of flexibility when it comes to makes and models. Plus, you’ll enjoy the stability of structured payments which takes the stress out of budgeting.

At My Car Credit, we’re committed to helping Brits secure the best auto finance deals, including Hire Purchase agreements. Contact us today to find out more about how to qualify for HP finance and kickstart your journey to car ownership. Our friendly team is always happy to chat, answer questions and give you the full hire purchase explanation.

As well as hire purchase, we specialise in industry-leading deals on other car finance options, including popular models like personal contract purchase (PCP) and personal contract hire (PCH).

Give us a call on 01246 458 810 or email us at enquiries@mycarcredit.co.uk to find our more.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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How to Refinance a PCP Balloon Payment

Is There a Maximum Age Limit 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

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Car Finance Declined: 5 Possible Causes

There’s nothing more disheartening than dreaming of a brand-new car, only to have your finance application declined. Before you feel too deflated, remember that it’s not necessarily the end of the road. There are various reasons why car finance applications can be turned down and understanding them can help improve your chances of success next time.

In this article, we’ll explore five possible reasons you’ve been refused car finance – from credit history to each lender’s criteria – and offer some expert tips on how to turn the tables.

1. Poor credit history

One of the most common reasons people are refused car finance is a poor credit history. Lenders rely on your credit score to assess your trustworthiness as a borrower. Credit scores are generated by credit reference agencies, which provide a credit report for car finance lenders.

Firstly, it’s important not to continually make multiple applications when you’ve been refused car finance. That’s because each hard search with a credit agency leaves a visible mark on your credit file. These can stack up and affect your credit score over time because they typically indicate previous rejections.

A history of late or missed payments on utility bills and finance repayments can drag down your credit score and make lenders cautious about approving your application. Other reasons for a bad credit score include a lack of credit history, common for younger customers, county court judgements and not being on the electoral roll.

To improve your chances, consider building a better borrowing history before submitting your next application. Joining the electoral register is a simple step to take, but you can also avoid missed payments and ensure you pay other finance agreements and bills on time.

2. High debt-to-income ratio

Mainstream lenders not only look at your credit score but also your debt-to-income ratio. This number measures the percentage of your monthly income that goes towards paying off debt. Many lenders use this to get a better idea of your current personal circumstances, rather than simply basing their decision on a low credit score or good credit score.

If you’ve been declined car finance, it may be that you’ve reached your credit limit. In other words, any more monthly payments would put you into financial difficulty. A responsible lender won’t knowingly approve your car finance application with that in mind. To lend responsibly, they need to ensure applicants meet their own criteria for affordability.

Multiple existing loans like credit card balances, a mortgage or other financial commitments can negatively affect your ability to take on additional auto finance debt. Reducing your existing debts or increasing what you earn can help lower this ratio and make your application more appealing to lenders.

3. Unrealistic expectations

Lenders want to ensure you can comfortably manage your leasing or car finance payments. If your income doesn’t meet their affordability criteria, your application may be declined.

For example, it’s unlikely you’ll be approved for a £60,000 car loan on a £30,000 salary. Car finance deals make it easier to afford a better car compared to paying money up-front, but there are still limits to what you can afford in terms of repayments.

Before applying for car finance, assess your budget and factor in all monthly expenses to determine how much you can realistically afford. Yes, that brand new Audi SQ5 Sportback set to launch in 2024 is a dream. But if it doesn’t match your borrowing power there’s a high chance you’ll be refused car finance.

4. Lack of employment stability

Stable employment is one of the most important things lenders consider when assessing car finance applications. If you’ve recently changed jobs, have gaps in your employment history or work on a temporary or freelance (self-employed) basis, lenders may view it as a risk factor and you could be refused car finance as a result.

Self-employed people usually struggle with their employment status as it’s hard to guarantee how much you’ll earn. This can be very frustrating, especially if you earn a good amount through self-employment but simply don’t meet the lender’s criteria. In this instance, it’s well worth comparing deals with a few finance companies. There are also specialist lenders for self-employed people.

Having a consistent job and regular income can increase your chances of being approved for car finance. Checking your employment status is just another form of affordability – lenders think that you’re more likely to keep up with loan repayments if you have a steady amount of money coming in each month.

5. Applying with multiple lenders

Another reason you may be refused car finance is having too many applications on your credit file. There are a few reasons for this, but above all else, it’s another factor that leads to a bad credit score (also known as a bad credit rating).

When you apply for car finance, most mainstream lenders carry out a ‘hard’ credit check as part of the screening process. As we mentioned earlier, multiple hard searches in a short period can negatively affect your credit score and make lenders wary. If you’re refused for car finance by one lender and immediately apply with another, you may be seen as a high-risk borrower.

This is why it’s important to be strategic when it comes to car finance. Working with a broker like My Car Credit can help you establish your borrowing power before sending through an application. Instead of a hard search, we’ll take a ‘soft’ search that doesn’t leave a mark on your credit score. It’s good practice to check whether a lender will perform a hard or soft search to avoid unnecessary poor credit.

Tips to boost your application

Been refused car finance? Here are some expert tips to boost your chances and get your application over the finish line:

Choose the right lender

Different lenders have different approval criteria. Some specialise in car finance for poor credit and others focus on prime borrowers. Finding a lender that aligns with your credit profile will help reduce your chances of being declined car finance.

Save for a larger deposit

A larger upfront deposit can reduce the amount you need from finance agreements and make your application more attractive to a car finance company.

Secure a guarantor

If your credit history is a concern, asking a financially responsible guarantor to co-sign your car finance agreement can improve your approval chances.

Review your budget

Make sure your budget is realistic and that you can comfortably afford the monthly payments before applying for car finance.

Improve your credit score

A proactive approach to improving your credit file can open doors to better car finance options in the future.

Refused car finance? We’re here to help

We love a good challenge at My Car Credit, which is why we’re happy to work with applicants who have been declined in the past. Instead of giving up, we see rejections as an opportunity to assess your financial situation and address outstanding issues.

We’re not a standalone mainstream lender. Instead, we’re a car finance broker, helping people get car finance by working with a large panel of lenders. This makes it easier for for us to find suitable deals and get you approved for car finance, whether it’s hire purchase, personal contract purchase or leasing.

Give our free car finance calculator today!

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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

What is Hire Purchase? – Simple HP Explanation

Bank Loan or PCP: Which is Right for You?

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

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How to Finance a Car in 4 Easy Steps

Car finance is growing in popularity in the UK. In fact, the Finance & Leasing Association (FLA) recently announced that consumer car finance has increased by 39% from February 2021 to February 2022.

Why? Car finance is an affordable, accessible way of purchasing a new or nearly new vehicle. There are various kinds of car finance available, depending on the circumstances of the buyer, and many lenders will now work to provide car finance to those with a poor credit rating.

If you’re new to the car finance world, you may be wondering how to actually finance a car. This article is here to help you gauge what to look for when considering car finance, helping you to stay in the driving seat.

How to finance a car: 4 steps

Establish your priorities

There’s no ‘one size fits all’ approach – different kinds of car finance will suit different people differently! One of the best ways to work out which type of car finance would suit you is by asking yourself key questions.

Are you looking for a new or nearly-new vehicle? Would you prefer to own your car at the end of your car finance deal, or will you plan to sell it? What kind of credit score are you working with? Can you work with mileage and other usage caps?

Once you’ve got an idea of the answers, you’ll be better able to tailor your car finance search.

Ask yourself what you can afford

Remember, car finance can be made up of different kinds of payment, depending on which finance option you opt for (more on that later). You need to ascertain what you’re able to afford, so that you can choose a deal that suits you.

You may prefer higher monthly repayments and a shorter term or lower deposit, or favour things the other way around. If you want to purchase the car at the end of the finance term, you’ll need to factor in this one-off payment. Remember, if you opt for a finance term with mileage or other limits, you may face penalties if you exceed these.

Your credit score will play a significant role in the kind of car finance you can secure. Higher credit scores tend to result in lower interest rates and better deals, but plenty of car finance providers can still work with you if you have a poor credit score – just be sure to determine who these are from the beginnings of your search.

Decide which car finance is for you

There are different kinds of car finance – your perfect deal depends on your needs. The most common are car loans, personal contract purchase, hire purchase, and personal contract hire. All of them involve making affordable monthly repayments over a pre-determined period of time, alongside interest.

We’ve written plenty about the pros and cons of these different kinds of car finance elsewhere – just browse the hundreds of helpful blogs and articles that we’ve compiled – but a quick summary goes as follows:

Car loans are like a personal loan, making them more expensive and better for those with good credit scores, but you will own the car from the get-go.
Personal contract purchase is a flexible option and you can opt to purchase the car at the end of the finance term.
At the end of hire purchase, you’ll automatically own the car and you’re paying less interest, but your monthly repayments are higher.
Personal contract hire is essentially a long-term rental with mileage caps but lower monthly repayments.

Reach out to car finance providers

Now that you know what kind of car finance terms you’re looking for, you can reach out to car finance providers, many of whom will have an online application process to determine whether you’re suitable for car finance.

At My Car Credit, we make things easier by comparing deals across our large network of trusted lenders. You’ll get a no-obligation quote within minutes with simple, straightforward online applications. You just tell us about yourself and your priorities, and we’ll use our unique technology and stellar network with the best lenders to find the right car finance deal for your circumstances.

Car finance made easy

Don’t panic if you still have questions about how to finance a car – My Car Credit’s friendly team of specialist advisors are available to answer any questions that you may have.

We aim to take the stress out of the search, so get in touch today 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

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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

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Who is the Legal Owner of a Car on Finance?

happy man who has become legal owner of car

If you’re thinking about purchasing a car through a finance option, you’re not alone. Around nine out of 10 of the new cars sold in the UK are bought by people who use a finance option. However, there are still some grey areas when it comes to ownership.

More specifically, who is the legal owner of a car on finance? Is it the driver or the dealership? Read on as we provide the answers.

Who is the legal owner of a car on finance?

In truth, the answer is neither you nor the dealership. It’s the lender that provides the money. The person who drives the vehicle and maintains it – AKA you – is known as the Registered Keeper in legal parlance. In other words, you will make the repayments and deal with the day-to-day running of the car, but your name won’t be on the V5.

Is there any difference between the finance options?

Yes, there are, but only when the loan finishes. Both PCP and HP are agreements that require repaying before the V5 is transferred to you. However, something to keep in mind is the final payment regarding PCP. Unless you pay off the balloon repayment, you will not own the vehicle. Where you don’t have the cash or savings, you may have the option of taking out balloon payment finance instead. With Hire Purchase, the last instalment of your loan will clear the balance and make you the legal owner.

Do I have other options?

One thing you can do if you want to be declared the legal owner is to use a bank loan. That way, you pay back the money to the bank, and the vehicle is all yours from the outset. Of course, taking out an unsecured bank loan may not be an option for your circumstances. In addition, you may not find the terms competitive.

Find the right finance deal

At My Car Credit, we help drivers up and down the UK find the finance they need to upgrade their car – and eventually own it outright if preferred. It doesn’t matter whether your budget is small or if you don’t think you qualify, we try to accommodate everyone, including those looking for car finance with poor credit.

To find out more, please contact us on 01246 458 810 to speak to an advisor.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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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

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Who are the Best Car Finance Companies in the UK?

Woman browsing car finance companies on her laptop

So, you’ve decided to take the plunge and start looking for a new (or new to you) car. You’ve chosen to hold onto your hard-earned savings and opt for car finance instead. You certainly won’t be alone – over 90% of cars are now bought on finance in the UK.

You have various options available to you on how to finance a car. From going through the car dealership to applying online, there are plenty of ways to go. Whichever way you choose, it will ultimately be a car finance company that looks after you.

What do car finance companies do?

In a nutshell, car finance companies (or lenders) loan you the money to buy your car. They can often be part of a much larger organisation, such as a bank or car manufacturer. However, many of them are also independent businesses.

Whether you apply through a dealer, a broker or online, it is the finance company that you take out an agreement with. Furthermore, it is the finance company who owns the car until all payments have been made on the agreement.

There are many different finance companies across the UK. What’s more, they tend to focus on a particular area of the car finance market. For example, some finance companies specialise in helping customers who have poor credit. Others prefer to focus on good and excellent credit.

Introducing our panel of car finance companies

Being part of the UK’s largest car finance broker, Evolution Funding, My Car Credit has access to one of the largest selections of car finance companies out of any broker. Over the years, we’ve built up great relationships with these companies so that we can offer customers the best choice.

In addition, we’ve created market-leading technology that makes it easy for customers to get a quick decision on car finance. And because we have so many car finance companies on our panel, we can assist customers with all types of credit profile, from excellent and good through to poor and bad.

Read on for a bit of insight into many of the car finance lenders we work with.

Launched in 2006, Alphera Financial Services is part of the BMW Group, making them a motor company rather than a bank. This means that their products and services are developed specifically for those customers looking for car finance. They are multi-award winning and offer flexible finance solutions across a variety of new and used cars and motorcycles. As with all areas of the BMW Group, they put first-class service and an unrivalled understanding of the motor industry at the heart of their approach.

BNP Paribas is a leading provider of finance in Europe, operating in over 30 countries. They have over 45 years of consumer finance experience and so are well placed to help you with car finance! They offer a wide range of easy-to-use car financing products including hire purchase, personal loans, personal contract purchase, personal contract hire and value-added products such as vehicle protection.

Established in 2005, Blue Motor Finance is one of the UK’s premier lenders of consumer car finance. With remarkable growth, they are ranked 1st in the Financial Times’ FT1000 Europe’s Fastest Growing Companies (March 2019). They use technology to ensure that they offer an excellent customer experience. This includes flexible and competitive finance packages, quick decisions, and reduced administration time.

One of the UK’s leading independent motor finance companies, Close Motor Finance was founded in 1988. They are part of Close Brothers Group plc, a leading UK merchant banking group that was established in 1878! They offer a range of finance products for cars, motorcycles and vans. Close are multi-award winning, including being named Finance Provider of the Year (Prime) at the Car Dealer Power Awards 2020. This was due to their superb customer services.

With over 40 years in the motor industry, MotoNovo Finance is one of the largest and fastest growing car finance companies in the UK. The Consumer Credit Awards 2020 voted them the Best Car Finance Provider, along with many other achievements. They can help with funding cars, vans and motorbikes.

Dating back to 1956, Northridge Finance is part of the Bank of Ireland UK. Northridge have established themselves as one of the UK’s most trusted finance companies in the motor finance market. They were named ‘Best Independent Lender (bank owned)’ at the Car Finance Awards 2019. Whilst they provide finance across a range of sectors, they specialise in motor finance. As part of Bank of Ireland UK, they have a solid foundation you can trust in.

Young, fresh and innovative, Oodle joined the car finance market in 2016. Their ultimate goal is “to make buying a car as easy as buying a t-shirt on Amazon”. They are heavily focused on using technology to transform the way that people finance their cars. What’s more, they are developing a customer-first, fully integrated digital retail experience. They have a great reputation, earning them some great reviews on Trustpilot.

PCF bank has been financing customers’ cars for over 25 years. They have plenty of specialist knowledge and experience to help you with your car purchase. Since they are independent, they have no ties to any car manufacturers and so their customers have total freedom when choosing a car. They assess all applications on a case-by-case basis, offering car ﬁnance on both new and used cars between £2,500 and £250,000.

Founded in 1985, Paragon Bank plc are on the FTSE 250 and are specialists in motor finance. They offer finance on cars, LCVs, motorhomes and caravans. Furthermore, their car finance is available to homeowners, tenants and those living with parents, making them a great addition to our panel.

Launched in 2012, Startline are a flexible lender who offer specialist finance for the near-prime market. What this means is that they often approve applicants who have been previously declined by mainstream prime lenders, while still offering attractive rates and terms. This is great if you have a less than perfect credit score but don’t quite fall into the poor credit bracket.

Advantage Finance is a subsidiary of S&U plc and was founded in 1999. They are another flexible lender who are often able to provide credit where other lenders won’t. They provide a straightforward, easy to understand Hire Purchase product that allows customers to finance the purchase of new and used motor cars, vans, motorcycles or caravans from any licensed UK dealer.

Founded in 1983, Billing Finance are a privately-run, family owned, vehicle finance company. Offering hire purchase agreements, they focus on customers with non-standard credit profiles that may not fit the automated underwriting processes of other lenders. They can finance cars, motorbikes, light commercial vehicles and leisure vehicles, such as caravans and motorhomes. Billing Finance were named Best Independent Lender (Non-Bank Owned) at the Car Finance Awards 2020.

Established in 1973, Marsh Finance are an independent, family-owned finance company that offers both Hire Purchase and Personal Contract Purchase. They pride themselves on offering sensible finance by being a responsible lender. They have grown to being a leading lender in the motor finance market, including catering for those customers with impaired credit.

Moneybarn is the UK’s leading non-standard vehicle finance provider. Founded in 1992, they specialise in helping customers with a poor credit score who may have been turned down by other lenders. They can help with the financing of cars, vans and motorbikes. Moneybarn have won awards for their service and approach to lending, including ‘Non-Prime Lender of the Year’ at the Motor Finance Europe Awards 2020 and Feefo’s Platinum Trusted Service Award 2020.

Established in 2014, Specialist Motor Finance funds Hire Purchase agreements for customers. If you have a less than perfect credit file, Specialist Motor Finance may be the option for you. They offer products that are comparable in quality and service to conventional prime lenders, but with a more flexible approach.

Moneyway is part of Secure Trust Bank plc, who are the only UK bank awarded a Customer Service Excellence accreditation. They look after customers with great credit through to not so great and so are a nice, flexible option on our panel of car finance companies. With the backing of Secure Trust Bank plc, you can be sure you’re in safe hands with Moneyway.

Zopa are probably the most unique car finance company on our lender panel. In 2005, they built the first ever peer-to-peer (P2P) lending company. Their car loan rates are often better than the dealerships and among the lowest in the market. What’s more, they’ve won awards for their customer service year on year.

Of course, we must include Evolution Loans because it’s Evolution Funding’s sister company – Evolution Funding is the company behind My Car Credit. Evolution Loans lends its own money for customers looking for Hire Purchase agreements on cars and LCVs. They are often able to accept applications where other lenders have been unable to.

Why use a broker when applying for car finance?

Now that you know a bit about each car finance company, you may be thinking about going direct to the lender of your choice. However, by taking this approach, you may struggle to find the best rate with the right lender for your circumstances. What’s more, it could take a lot of time and legwork, as well as involving multiple credit searches, which can damage your credit file.

At My Car Credit, we do all the legwork for you! Our smart soft search technology allows us to check your application against all these companies in one go, without impacting your credit score*. The results come back through to us in seconds and the best deal available for your circumstances wins your business!

You can test all this out by calculating car finance and then making a no obligation online application. So don’t delay, find out if one of our car finance companies can help you today!

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

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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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

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Coronavirus (COVID-19): An Update from My Car Credit

man wearing a face mask during coronavirus pandemic

In these unprecedented times, My Car Credit is continually assessing the situation, following Government guidelines and doing what is best for customers and staff. We are operating business as usual, although with some adjustments to allow our staff to safely and effectively serve customers.

• Our priority as a business is the safety of our staff, dealer partners and customers.

• All of our staff are remote working in the safety of their homes and continue to follow lockdown rules.

• For most dealer partners, we are remaining open to support online applications and approvals will be ready for collection or delivery after lockdown.

• All staff members are following stringent health and safety measures, using video and team collaboration tools for connecting with other team members and clients.

• Agents are continuing to support and advise motorists across the UK. This includes key workers, NHS staff, first responders, volunteers and many more who rely on their vehicles for work or to look after family.

• We have introduced additional security and affordability checks, as well as performing due diligence on car dealers that customers wish to buy from. We have also changed our payout process, which means that funds are not released to the dealer until the customer confirms they have taken delivery of the vehicle.

• We are keeping our finger on the pulse of all car finance updates, government and regulatory advice to better serve our customers.

During the lockdown, we want to continue to support our customers. If you are struggling with your finances and want to discuss deferring your loan repayments, please click here to find out how to get in touch with your funder.

Please note that this is an exceptional time, and we are experiencing a much higher volume of calls than usual as a result of enquiries relating to COVID-19. It may take longer than usual to get through, but rest assured we’re working our way to you as quickly as we can. We appreciate your patience.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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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

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1. Poor credit history

2. High debt-to-income ratio

3. Unrealistic expectations

4. Lack of employment stability

5. Applying with multiple lenders

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Choose the right lender

Save for a larger deposit

Secure a guarantor

Review your budget

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