Car finance options compared:
What is the best option for me to buy a car?
If you have the money then buying a car with your savings means you won’t have any debt and you’ll own the car outright. The thing to beware of here is that if you are buying a brand car its value will depreciate rapidly and so it may not be a sound investment, especially if you plan to switch in a few years.
If you are set on owning the car outright then a personal loan is an option and may allow you to borrow more than if you opted to use a credit card. Things to remember with a personal loan is that acceptance isn’t guaranteed and if you are approved you will be paying interest, which depending on your personal circumstances and credit history may be expensive.
Personal Contract Purchase (PCP)
If you are someone who likes the idea of having a new car every few years then PCP is a good option. Also, because you are only financing part of the car’s value you can often obtain a more expensive car than you could with other financing options. But remember, with PCP you won’t own the car unless you pay off the hefty balloon payment at the end of your agreement. You also will have mileage restrictions and could be charged extra for any damages that occur.
Hire purchase (HP)
A HP agreement works similarly to a personal loan, as you are borrowing and paying off the full cost of the car. However for the duration of the agreement you won’t own the car. A hire purchase agreement can be a good option if you are struggling to get a low rate personal loan, as with HP the loan is secured against the car. Because of this the risk of lending to you is reduced which may mean your chances of acceptance are improved.
Car leasing is a way to access a new car through paying a monthly payment. Through a car lease you are effectively just renting the car and will never own it. You will have a mileage limit and will be responsible for its upkeep. As part of the agreement you will have to pay a deposit.
Car subscriptions are a relatively new product and much like subscribing to a tv streaming service you subscribe to car membership. You pay a monthly subscription and in return receive a car. Monthly payments can be high but that is because they often include the majority of other car related costs such as maintenance, breakdown cover, tax, and some include insurance. What’s included within your monthly payment will differ between providers so check the small print before agreeing to anything.
Car finance options for bad credit
If you have bad credit and are looking to finance a car you have options. If you’d like to buy the car outright with a personal loan your greatest chance of acceptance is most likely to be if you can find a guarantor to support your application or opt to secure the loan against an asset, such as your house. In either case, think carefully and compare your options. Finance options for those with bad credit are often expensive.
How can Choose Wisely help me find car finance?
We partner with the UK’s top lenders and specialist car finance brokers to ensure that whatever your circumstances we can get you to the right option. You can compare loan options by clicking the “Get Accepted” button at the top of the page and completing a Choose Wisely loan search.
Car finance FAQs
Approval for car finance isn’t guaranteed and is dependent on a number of factors such as your personal circumstances and credit history.
Yes. When applying for car finance lenders will check your credit history to ensure you can comfortably afford the repayments and to determine that lending to you is a safe and responsible thing to do.
This will be dependent on the provider. Be sure to check the small print as even though a provider may allow you to settle your car finance early, there may be charges to do so.
No. If you are applying for car finance it must be in your name only.