How does car financing work?
Car financing can be confusing for those new to it, so we’re here to explain how it works. The very first step is to decide how much money you want to borrow and can actually afford, based on your current income and spendings. Our Car Finance Calculator, which you will find further below, can help you work this out.
Next, based on your capabilities and needs, choose the new or used vehicle you want to finance. Once you’ve sorted out all the basics, all that’s left to do is to get a quote. Get your car finance quote with us and we’ll explain everything along the way! This will, in no way, impact your credit score.
Once we’ve found the right deal for you and your application is accepted, our customer service team will ensure you get your car as quickly as possible.
There are a few different types of car finance available, each with its own set of benefits. If you’re not sure which to go for, don’t worry - we explain these different car finance options below.
What types of car finance are available?
There isn’t just one way to finance a car - you do have a few options. While one option might suit you more than the other, it’s always good to understand what’s available. Here are your car finance options explained:
Hire Purchase (HP)
- Higher monthly payments, but you will own the car outright once you’ve completed all payments.
- Required to pay a deposit (minimum 10%).
- 1 to 5-year term - this means you can choose to pay the borrowed amount back up to 5 years later.
- No balloon payment at the end of the term.
Personal Contract Purchase (PCP)
- The most common form of car finance.
- 3 or 4-year term.
- Required to pay a deposit (minimum 10%).
- Balloon payment at the end of the term (if you want to own the car outright).
- No need to pay a large sum of money upfront.
- Make up for the deposit with slightly higher monthly fees.
- Part-exchange deals available.
- Flexible and affordable options.
- Poor credit scores are considered.
- People with no credit history are considered.
- PCP, HP and No Deposit deals available for people with bad credit history.
What is the best car financing option?
There is no universal answer for this. As we’ve explained, one car finance option might work for some, but not others. This makes it even more important that you understand how each one works.
When deciding whether to finance your car through Hire Purchase (HP) or Personal Credit Purchase (PCP), you’ll need to analyse the affordability of the finance type, as well as any terms and conditions attached to the type of contract you choose.
If you have any questions about car finance or want it explained further, give us a call! Our customer service team is always available to help talk through your options.
How much does car finance cost?
This is a difficult one to explain as it’s largely subjective. The car financing deal you’re offered will depend on your specific circumstances, just as the amount you pay will. Factors such as the value of the car, the size of your deposit, the length of a loan, your credit score and the type of financing are the real deal breakers.
If you want to see how much you’re likely to be able to borrow, then scroll down to our car finance calculator, or click here. This will give you a good idea of how much your monthly payments will be.
Can I get car finance if I’m….
New cars vs used cars
Financing a new or a used car comes with its own set of pros and cons. Perhaps the biggest benefit of financing a new car is that you have the protection of a full manufacturer warranty should something go wrong. Newer cars also tend to have more advanced technology and be more fuel-efficient.
However, one great reason to finance a used car is that you avoid taking the financial hit of depreciation - most cars lose around 20% of their value the minute they leave the dealership. In addition, used cars can also be a 100% safe purchase if done through a reputable car dealer, just like the ones we work with.
In short, there is no answer to the question of whether it is better to finance a new car or a used one. It all comes down to your specific needs and financial situation.
How much can I borrow?
Now that we’ve explained the basics of car finance, it’s time to put them into practice. Use the calculator to get an idea of the amount of money you want to borrow and how you want to pay it.
Wanting to finance an electric car?
Quick Car Finance makes it easier for you to transition into a more sustainable future. If you would like to finance an electric car but don’t know where to start, we can direct you to reputable deals. Our finance application process is also just as fast with electric cars as it is with standard vehicles! Visit our Electric Car Finance page to learn more.
Car Finance Explained FAQs
1. Does car finance affect my mortgage?
When you apply for a mortgage, lenders will likely take a thorough look at your finances, including any car finance deal you’ve had. Defaulting on car finance payments, even years after you’ve paid off your car, can damage your credit report and score and, in some cases, you may find yourself ineligible for better mortgage deals or a mortgage at all. Learn more here.
2. Even if I meet all the requirements, is car finance guaranteed?
Unfortunately not. However, the more flexible and trustworthy the company you apply with, the bigger your chances of getting accepted. Despite this, we have plenty of reputable lenders that we work closely with, so we’ll provide you with a good range of options if your first choice doesn’t work out.
3. What happens if I’ve been refused car finance before?
While having your application rejected may seem like the end of the world, there are steps you can take to make sure that next time you apply. Read this article to learn what to do if you find yourself in this situation.