Apply for Car Finance with ChooseMyCar
Apply with ChooseMyCar Finance today and you can walk into the car dealership just like a cash buyer - knowing you have the very best car finance deal in your pocket.
Borrowing £6,500 over 48 months with a representative APR of 21.4%, an annual interest rate of 21.4% (Fixed) and a deposit of £0.00, the amount payable would be £196.24 per month, with a total cost of credit of £2,919.52 and a total amount payable of £9,419.52
Not sure what finance is right for you?
We're here to help. This handy table should aid your decision
|Hire Purchase||Personal Contract Purchase||Personal Loan|
|Requires initial deposit||Usually requires deposit||Usually requires deposit|
|You own the car outright|
|Car is yours at the end of the agreement|
|Fix monthly payments|
|Optional balloon (final payment)|
|Excess mileage charges|
|Secured against an asset (eg. car)|
Different Types of Car Finance
It seems like there are a million different ways to finance a car.
HP. PCP. PCH...you almost need an Enigma machine to decode them all. So what do they all mean? And which one is right for you?
Here's our brief car finance guide to help you decide:
PCP - Personal Contract Purchase
PCP is a type of secured car finance offered by many car dealerships, high street banks, and specialist lenders. Monthly payments tend to be low compared with other types of finance - so you'll often see dealerships and lenders promoting these deals.
That's because you don't automatically own the car at the end of the term - so you're not paying off the car's full value. Instead, you have the option to purchase the car at the end with a "balloon" payment.
Alternatively, you can return the car and walk away. Lenders may also offer you an "upgrade" near the end of the contract to keep your custom. So it's a great option if you want to drive a new car every couple of years.
However, if you definitely want to own the car outright, a comparable hire purchase deal almost always works out cheaper overall.
With a PCP contract, you're responsible for servicing the car and keeping it in good condition. And the lender will usually impose a limit on the number of miles you can drive - typically between 8,000 and 12,000 per year.
Bear in mind, the best PCP deals usually require a good credit score.
HP - Hire Purchase
With a hire purchase agreement, you own the car outright at the end of the term. It's not necessarily an automatic process; some lenders may require a final fee, but this can be as little as £1.
While monthly HP payments are typically higher than comparable PCP deals, HP works out as a cheaper way of owning the car. However, you'll have less flexibility than with PCP deals; for example, you won't have the option to upgrade the car towards the end of the term.
The car acts as security on the loan, which lowers the risk to lenders. That's because they can repossess the car and sell it to recover losses if you miss too many payments. On the plus side, the reduced risk often means a lower typical APR.
HP finance is usually taken over 1-5 years, although available terms differ between lenders. There are no limits on how many miles you clock up.
You'll also likely need a good credit score to access the best HP deals.More about HP
PCH - Personal contract hire
Leasing a car could be an excellent option - if you are fine with never having the option to own the car.
It's not quite the same as hiring a car but works in a similar way; you agree to pay to use the car for a set period, then return the car. End of story.
One significant advantage is monthly payments are lower than comparable HP and PCP contracts. That's because you are only paying for the use of the car, not to own it.
Leasing is often used by businesses because of the tax benefits - although personal leasing is becoming more popular. It's a great way of using a car for a year or more at a far lower price than PCP or HP. The disadvantage is if you fall in love with the car, there is no option to own it at the end.
PL - Personal loan
A personal loan may be a good option for financing a car if your credit score is not ideal.
This type of finance is unsecured - so there is no risk of losing the car. Lenders typically mitigate that risk by setting a higher APR (compared with a secured loan).
Getting pre-approval on a personal loan puts you in a similar position to a cash buyer; that could help put you in a strong negotiating position when buying, as you'll be free to buy any car from any dealer.
Due to the vast range of personal loans on the market, bad credit often isn't a huge issue - in particular, a guarantor loan could be a great option if your credit score is low.
Why ChooseMyCar Finance?
With deals from a wide range of lenders, ChooseMyCar is the place to find car finance to suit your needs and circumstances.
- No deposit finance
- Flexible repayments
- Poor credit finance
- All circumstances considered
- Easy online applications
- Fast decision
Frequently Asked Questions
It is possible to get car finance with bad credit. Many lenders provide loans and finance options specifically for people with bad credit.
Personal loans can be a great car finance option if you have bad credit. And a guarantor loan may help you avoid higher interest rates; this is where a friend or family member co-signs the loan, agreeing to meet payments if you’re unable to.
With pre-approval on a personal loan, you can walk into the dealership like a cash buyer. You can be in a better position to negotiate on price. And you can avoid the stress of the finance office.
A voluntary termination agreement lets you cancel your car finance early. By law, you can voluntarily terminate a HP or PCP contract.
You can cancel HP and PCP agreements if you've paid back 50% of the total finance amount - and if the car's in good condition. The PCP balloon payment is included in the 50% - so you'd have to pay half of this too.
Not repaid enough yet? You may be able to pay the difference up front and then cancel the contract. But if you terminate after you've already repaid over 50%, you won't receive a refund.
Bear in mind, voluntary termination may appear on your credit file. But it probably won't affect your score.
You shouldn’t buy (or sell) a car with outstanding finance. Essentially the debt will be passed onto you, and you could become liable to repay the existing amount.
According to HPI, one in three cars sold have an active finance agreement. Reputable dealers will perform checks to make sure their cars don’t have outstanding finance. But you should carry out HPI checks yourself - especially if you’re buying from a private seller.
If you unknowingly buy a car with outstanding finance, you have the right to keep it. But the finance company may look to you for payment. Keep any receipts and details of the sale so you can prove you bought the car in good faith.
A car on finance is legally owned by the finance company until all payments are made. You are the registered keeper of the car, but not the owner.
With HP and PCP contracts, you only become the legal owner at the end of the term, once you’ve made all payments. And with PCP, you’ll have to make a balloon payment at the end to keep the car. Until then, the finance company legally owns it.
If you’re leasing the car, you never own it. But if you buy a car using a personal loan, you are the legal owner straight away. You simply repay the lender the money you borrowed.
Your credit file is checked if you apply for car finance. And you’ll usually have to provide proof of ID, address, and income. The specific documents you’ll need ultimately depend on the finance provider you go with.
Providers will check your credit score when you apply - initially via a soft search. They’ll perform a hard credit check if you choose to enter into a contract with them. Most lenders will need to see your driving licence - full or provisional. You may also be asked to provide:
- Your passport - for proof of ID
- Utility bills or council tax letters - for proof of address. These usually need to be dated within the last three months.
- Payslips - for proof of income and to make sure you can afford the payments. Some providers may ask to see a few months' worth.