Where to get car finance

Should you apply online or accept the interest rate from a dealership? Keep reading for where to get finance and which type is best for you

BuyaCar team
Sep 29, 2019

If you’re buying a car from a dealership, then you’ll probably be offered finance at the same time.

But there’s no need to accept the dealership's finance and in many cases you can save hundreds, if not thousands of pounds, by shopping around for the finance, because you can still buy the car that you want while arranging finance somewhere else.

That's also the case with BuyaCar: there's no obligation to use our finance, but we do work with a panel of lenders to ensure that we offer competitive rates.

Meanwhile, if you’re changing cars, you don't have to go back to the same dealership or retailer: any professional car seller should be able to handle the end of your outgoing finance agreement and switch you to a new agreement on another car.

Wherever you look for finance, it's easy to compare quotes because lenders can carry out a “soft-search” that provides you with an estimated quote without making a mark on your credit history. Make sure to get quotes with the same deposit, contract length and mileage allowance - if you're considering PCP finance - and you should clearly be able to see which finance deal offers you the best value with the lowest monthly payments.

Every quote should include an APR figure. This is the cost of finance - a proportion of the total amount you borrow - which includes interest and fees. It's calculated in a standard way so you can compare deals.

Quotes should also include the total amount payable for the entire agreement - including making the optional final payment to buy the car if you're looking at PCP deals - which is another standard way of comparing the cost of finance. Be aware, however, that deposit contribution discounts are not normally taken into account in this figure. If in doubt, ask the finance company to clarify.

Where to get finance

Online

Companies such as BuyaCar often use a panel of lenders to get the best quote for different types of driver and car. By having different finance firms catering for drivers in different situations, you'll normally get a competitive quote.

A full range of car finance is usually available, including Hire Purchase (HP), which spreads the full cost of the car into a series of monthly instalments. At the end of the contract, you own the car.

Personal Contract Purchase (PCP) is also offered, with lower monthly payments that only cover part of the vehicle's cost. You can return the car with nothing left to pay - provided it is in good condition and below the pre-agreed mileage limit - or buy it for a pre-ageed amount at the end of the term.

As long as the price is right, then it makes sense to take out finance from the same place that you purchase your car from because it's convenient and there shouldn't be any communication issues between the finance provider and the car seller.

Increasingly, ID verification and signatures can be completed online. This may mean that you won’t need to send in original documents or print and sign forms, although original documents may be required by some lenders. Either way, this should simplify the process compared with having to go through everything in a dealership.

Franchised dealership

If you're buying a brand new car on finance, then it’s likely that you'll get the best possible deal from a franchised dealership that’s linked to the manufacturer.

0% finance - also known as interest-free credit - is often available. Even if this isn't on offer, the interest rate is likely to be subsidised by the manufacturer, so you could find yourself paying an extremely low interest rate as well as benefitting from deposit contribution discounts that reduce the amount that you have to pay.

PCP and HP finance are typically available, while leasing may also be offered (this works like long-term car rental, so you have to return the car when the contract ends). You can get these deals by visiting a dealership in person but it’s also possible to configure and order a car online with several manufacturers, making it simpler to compare offers between different brands.

If you’re looking for a used car, then you’ll probably find that the attractive finance rates disappear, along with the option of leasing. However, you'll also benefit from far lower cash prices in the first place, so in most cases monthly payments will be much cheaper for a used model compared with a new one. In general, used car finance rates at franchised dealerships are not as competitive as the rates available for new cars, though.

That’s why it can pay to arrange finance elsewhere, from a bank, finance broker or site such as BuyaCar. You may benefit from a lower rate, while buying the car that you want for a much lower cash price than a new equivalent.

Independent dealership

Before going into an independent dealership, it’s worth doing your homework as they generally have higher interest rates compared to what you’ll find elsewhere.

But, there’s nothing stopping you from arranging your own PCP or HP finance, and using this to buy from an independent dealership. You might be able to save around £1,000, depending on the price of the car and the interest rates available.

Banks, finance brokers, and sites such as BuyaCar all offer finance that can be used to buy a car in person.

Separate finance broker

Credit brokers typically work with a range of lenders, offering different interest rates for people with various circumstances. This means that there’s a good chance that they can offer a competitive rate for your particular car, based on your credit profile.

BuyaCar offers this service, as do a number of other brokers, making it easy to compare rates and apply for the cheapest deal. 

Bank loan

Bank loans offer straightforward credit. You borrow an amount of money and then repay this with fixed monthly payments including added interest. It’s easy to compare the cost of borrowing by looking at the APR figure - the higher it is, the more interest you'll pay.

This does mean that the flexibility and low payments of PCP finance aren’t available, as your monthly payments cover the full value of the car.

The loan isn’t secured on your car, though, which may reduce the amount of credit that’s available to you elsewhere, as this is a greater risk to lenders.

        

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