Find loans and HP deals you're eligible for
- Find great deals to save you money
- Won't harm your credit score
- Compare a range of lenders in minutes
Warning: late repayments can cause you serious money problems. See our debt help guides.
The cheapest way to buy a car is to buy it outright without borrowing money. If you can save a regular amount and only make the purchase when you’ve built up enough money, then you won’t pay a penny in interest. Sometimes that’s not an option, however, in which case you can consider car finance. Car finance is the process of funding a vehicle purchase over a set period of time.
If however you do need to borrow in order to purchase your next car, then remember that in general terms, the more you borrow, and the longer the period over which you borrow it, the more you’ll end up paying in interest. If you can afford to, make part of the payment using your own money in order to reduce the amount you need to borrow.
If you aren’t buying a car outright with cash, then there are a few different ways to fund your purchase. Here are some popular options:
A broker, such as Zuto, can quickly provide personalised quotes for different forms of vehicle finance based on your answers to a few simple questions.
Personal loans are available from a range of lenders – including banks, building societies and supermarkets. Personal loans are generally available over terms between one and seven years. Each lender will have its own interest rates, fee structures and amounts available. If you apply for a personal loan, the lender will look at factors like your income, expenditure and credit score when deciding whether or not to approve the loan. Once approved the funds are transferred to your account and you’re free to make your purchase.
If you’re approved for a credit limit that covers the purchase of the car you’re after, and you’ve compared credit cards to find a lengthy 0% on purchases deal, then using a credit card can be a smart way to buy a car. As an added bonus, credit card providers are obliged to give protection on credit card payments between £100 and £30,000.
The downside is that if you don’t pay off the debt within the 0% period, the rate is likely to revert to something far less competitive than a standard loan. Because you’re only obliged to make the minimum monthly payment, you’ll want to work out how much you need to pay each month in order to clear the debt before any offer period on the card expires. Additionally, if you’re worried you’d be tempted to make further purchases on the card, then this might not be the smartest option for you.
Compare 0% purchase credit cards
If you opt for hire purchase, you’ll generally be expected to pay a minimum of 10% of the vehicle’s value upfront, and you’ll then pay the remainder off over one to five years. The credit is secured against the car, so if you fail to keep up repayments you stand to lose the car.
Hire purchase agreements are normally arranged by the dealership. This means they’re quick and easy to sort out. However it also means that they tend to be more competitive when you’re buying one of their new cars, as opposed to a used car.
With personal contract purchase (PCP) you essentially take out a loan for the difference between the current value of the car, and the projected value of the car at the end of an agreed period (generally one to four years). You’ll make monthly payments, and then at the end of the agreed period you can make a balloon payment to purchase the car outright.
PCP’s are arranged so that at the end of the agreed period, the car should be worth a little more than the balloon payment you would have to make to buy it outright. You can’t claim this back as cash and walk away, however – at the end of the agreed period you have three options:
When you enter into a PCP, you’ll be asked what mileage you expect to clock up in the vehicle. It’s important to answer this honestly, otherwise, you’ll find yourself in a weaker position at the end of the PCP. Bear in mind that if you damage the car or exceed the agreed mileage limit there will be charges to pay at the end of the agreed period.
The credit is secured against the car, so if you fail to keep up repayments you stand to lose the car.
The best car loan for you will depend on your specific situation, but here are some of the important questions to ask before settling on a particular loan product.
Want to send GBP to the Democratic Republic of the Congo? We will help you pick the best international money transfer service and explain fees and exchange rates.
Transferring GBP-CAD is easy with our comprehensive guide to the best ways to send money from the United Kingdom to Canada.
Learn about what options you have to send money to Cuba.
Want to send GBP to Puerto Rico? We will help you pick the best international money transfer service and explain fees and exchange rates.
Sending money to Guinea (Conakry) from the United Kingdom? Compare international money transfer services and save on exchange rates and fees.
Transferring GBP-XAF is easy with our comprehensive guide to the best ways to send money from the United Kingdom to Chad.
Want to send GBP to the Republic of Cape Verde? We will help you pick the best international money transfer service and explain fees and exchange rates.
Want to send GBP to Benin? We will help you pick the best international money transfer service and explain fees and exchange rates.
Want to send GBP to Burkina Faso? We will help you pick the best international money transfer service and explain fees and exchange rates.
Want to send GBP to Barbados? We will help you pick the best international money transfer service and explain fees and exchange rates.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.