Finance
Car finance makes getting a new set of wheels far more achievable for most drivers. Rather than having to save up for years to get enough cash together, finance enables you to pay for your car with affordable monthly payments.
Not only could this help you to get a better car, but it allows you to budget more easily as well, as you know exactly what you need to pay each month. Watch the video above for a simple rundown of the three main car finance options available.
Finance can also offer greater flexibility - potentially enabling you to hand the car back without the faff of having to sell it or being able to choose to buy it at the last minute. Go for PCP finance and you get low monthly payments and can choose to return the car when the contract ends or make the optional final payment to buy it.
Opt for Hire Purchase, however, and you should pay less interest overall to own the car (assuming the same interest rate and deposit contributions for PCP and Hire Purchase options). Leasing, meanwhile, works like long-term car rental, with low monthly payments, but no option to buy the car - even if you love it. You simply hand it back and start again.
One of the key factors to bear in mind when considering car finance deals is the APR figure - which shows how much extra you have to pay in interest and other compulsory charges - along with the availability of deposit contribution discounts.
Interest rates have risen substantially in 2022, so you can expect to pay more for finance than in previous years. However, you can still often find incentives such as deposit contribution discounts, no-deposit options or - for some new cars - 0% APR, also known as interest-free credit, though you have to balance the value of this with the higher cost of a new car and the consequent need to finance a larger amount.
With so many options, though, things can get confusing and to get a feel for which car or deal offers you the best value, it’s always good to get like-for-like finance quotes (with the same type of finance, contract length, deposit amount and mileage allowance). Keep reading to work out the best finance option for you.
What is PCP finance? Personal contract purchase car finance explained
Fancy low monthly payments with the option to buy the car when the contract ends? Check out PCP finance - available for new and used cars
Halal car finance: interest-free leasing and finance options
Halal car finance – or Islamic car finance – can spread the cost of a car with no interest being charged, but there are other costs.
Car finance on benefits: can I get it?
Receiving benefits shouldn't stop you getting car finance, but there are some important facts to think about. Keep reading to find out more
Buy a car now and pay later: flexible finance
You can order a new car now with just a £199 deposit, and then nothing to pay for a month – here’s our guide to flexible finance
What is Hire Purchase (HP)?
Hire purchase offers you the ability to buy your car outright with affordable monthly payments and no large final payment. We reveal all
No-deposit car finance: how it works
A lack of a deposit doesn’t mean car finance is off limits, but as our guide shows, your monthly payments may well be higher
Van leasing: how does it work?
Leasing a van can be simple and very cost-effective. Here is how it works and how it can help you and your business
Electric car leasing: how does it work?
Looking to lease an electric car but you are a bit muddled by the concept? Read on for a full explanation of how EV leasing works
What is business car leasing?
Low monthly payments in exchange for a brand new car or van: find the right kind of business car leasing for you
Car leasing with insurance
Combining the cost of your car with insurance means only one payment to make each month - making car costs easier to manage
What is car leasing? Car leasing explained
Leasing – where you effectively agree a long-term rental of a car – is one of the cheapest ways to get into a brand-new car
Car leasing with maintenance
Looking for low monthly payments and the convenience of having servicing included? Car leasing with maintenance could be a good option
Car finance with bad credit: options including PCP
Low monthly payments despite a poor credit score: PCP finance can provide an alternative to car leasing with bad credit
What is Lease Purchase?
Regular, low monthly instalments with one large final payment: how financing a van on Lease Purchase compares with other types of finance
Should I refinance my car?
Cut your monthly finance payments or keep your vehicle at the end of a PCP contract by refinancing your car
What is Personal Contract Hire (PCH)?
Want low monthly payments on a brand new car but don't want to own it? Personal Contract Hire - also known as leasing - could be for you
How to refinance a PCP balloon payment
If you’re at the end of a PCP contract and want to keep your car but can't afford the final lump sum, here’s how you can refinance
How to get out of a car finance agreement
Need to get out of your car finance contract, but not sure how to do it? Keep reading to get your head around your options
What happens at the end of a PCP finance agreement?
Coming to the end of your PCP finance deal and not sure what happens next? Keep reading to find out your options
Car finance explained: what is a deposit contribution?
Deposit contributions are discounts that cut monthly payments on PCP finance and Hire Purchase deals, reducing how much interest you pay
Finance a car: your options compared
Personal Contract Purchase (PCP)
PCP is a flexible form of car finance for new and used cars with low, fixed monthly payments. When the contract ends, you can return the car, buy it by making the large optional final payment or trade it in for a new car - using any value in the car over the remaining debt (known as equity) towards your next finance deal - making it easy to regularly upgrade. More details More details
Hire Purchase (HP)
This spreads the cost of a new or used car across fixed monthly instalments. Once all payments are made, you automatically own the car. With no large optional final payment deferring some of the cost, monthly payments are higher than with PCP, though as a result you also pay less interest overall - as you're paying off the finance balance quicker. More details
Leasing (also known as PCH)
Personal Contract Hire, or PCH, is like long-term car hire with low, fixed monthly payments. This is normally only available on new cars and you have to return the car at the end of the contract with no option to buy it. More details
An alternative option is to take out a personal loan. This doesn't offer the low monthly payments of leasing or PCP but is more similar to Hire Purchase, enabling you to access a car for a series of fixed monthly payments. If you can access lower APR figures with a loan than with Hire Purchase, and there are no deposit contribution discounts available with Hire Purchase (which you wouldn’t be able to access by taking out a loan), you’re likely to be better off choosing a loan rather than Hire Purchase.