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Car finance

Car finance loans are a type of loan designed to help you find credit for the car of your dreams.

I want to borrow:

£

Over how long?

Loans displayed from 2 companies with term lengths between a minimum 1 year and maximum 7 years with a maximum 27.1% APR. How our loans calculator works.

How our loans calculator works

Our loans comparison shows how much each loan is likely to cost per month and in total. The amount we show is based on these assumptions:

  • The representative APR is the interest rate you'll be given
  • The loan amount you entered is the exact amount you'll borrow
  • You won't make any late or early repayments
  • You won't fail to make any of your loan repayments
  • You won't repay the loan before the end of the term
  • You won't make any overpayments or underpayments

Our comparison shows how much each loan should cost you, but the amount could be different if the way you repay it varies from the above assumptions. The amount could also be different if the lender offers you a different interest rate to the APR.

Warning: Late repayments can cause you serious money problems. If you fall behind on your mortgage or debts secured against your home, it may be repossessed. For more information see our debt help guides.

uSwitch Limited is a credit broker, not a lender, for consumer credit products. Our services are provided at no cost to you, but we may receive a commission from the companies we refer you to. For some loans a broker fee of up to 12.5% may be added to the cost of the loan.

Our providers

1plus1 Loans
1st Stop
1st Stop Personal Loans
AA
Amigo
Aspire Money
Bamboo Loans
cahoot
Central Trust Ltd
Fluent Loans
George Banco
Guarantormyloan
Hitachi Capital (UK) PLC
HSBC
Likely Loans
M&S Bank
Masthaven Bank Ltd
Monevo
Nationwide
NatWest
Norton Home Loans
Optimum Credit Ltd
Paragon Bank PLC
Post Office
Prestige Finance Limited
RateSetter
Sainsbury's Bank
Santander
Shawbrook Bank Limited
Step One Finance Limited
Suco
Tesco Bank
TFS Loans
Together
TRUSTTWO
UK Credit Limited
United Trust Bank
West One Secured Loans Limited
Zuto

What is car finance?

Cash is always the cheapest way to buy a car., but many people don’t have that luxury. If you don’t have the cash, you have two options. You can take out an unsecured personal loan. Or you could use car finance.

Car finance is a secured loan, as the loan is secured by the car you are purchasing. So like any secured loan, it means that if you fail to keep up your payments the car finance loan company may be entitled to repossess your vehicle.

What types of car finance are there?

Hire purchase

Hire purchase deals ask you to pay a deposit, around 10% of the price of the car. Then you pay off the rest in fixed monthly repayments over an agreed period of time.

You only own the car once you have made the final payment to the hire purchase car finance company. If you miss repayments they could take back the car.

Car dealerships, where you buy your vehicle, can set up hire purchase agreements. But to get the best hire purchase deal you should shop around. Compare hire purchase car finance deals using our car finance comparison.

The best hire purchase deals are for new cars, not used ones.

What rights do I have with hire purchase deals?

When you buy a car with a hire purchase agreement, there are rules to protect you. For example:

  • Once you have paid half the price of the vehicle, may be allowed to give the car back with no more payments.

  • After you have paid a third of the price of the car, it can’t be repossessed by the hire purchase company. It would have to get a court order to take the car from you.

Always check your hire purchase contract for specific terms.

Personal contract purchase

Personal contract purchases, also known as PCPs, are like hire purchase contracts. You’ll need to pay a 10% deposit on the car. But there are some important differences.

You will sign an agreement to pay a fixed monthly amount for the car. This will not total the whole value of the vehicle. You use the car while you are paying. When the contract ends you’ll need to choose what you do next.

You can hand the car back. If you want to keep the car, you can pay what the personal contract purchase finance company decides is its resale value. Or you can use the car’s resale value against the cost of buying a new car.

How does a personal contract purchase work?

To get a personal contract purchase you’ll need to pass a credit check.

The personal contract purchase agreement may limit how many miles you can drive, so if you go over the mileage limit you’ll be charged extra.

At the end of the agreement, you can hand the car back without paying a penny more. If you want to keep the car, you will have to make what is called a “balloon payment” to buy it outright at the end of the agreement. The balloon payment is usually based on the value of the car at the end of the personal contract purchase agreement and is likely to be much higher than the monthly payment.

You could also choose to get a new car by paying off the remaining cost of the old car and give the car dealership a new 10% deposit on a different new car.

What extra charges come with personal contract purchase?

Personal contract purchase agreements can be more expensive than other car finance deals.

Make sure the car you are handing back doesn't have extensive damage or the car dealer may ask you to pay extra charges.

If you've paid at least half the price of the car, you may be able to return the car early, without paying an extra fee, which is the difference between how much you have already paid and the price of half the car.

Personal contract hire

A personal contract hire is similar to personal contract purchase. The only difference is that you don't have the option to buy the car at the end of the agreement.

How does a personal hire contract work?

To get a personal hire contract you’ll need to pass a credit check and pay several months’ repayments upfront.

With a personal contract hire agreement, there may be a limit on how many miles you can drive on an annual basis. If you go over the limit, you’ll be charged a fee. However, you won’t need to pay for servicing or car tax during the length of the agreement.

At the end of the agreement, you can hand the car back without paying a penny more towards its price, unless it's damaged.

How do I find the best car loans?

You’ll need to shop around to find the best car finance deals. Use car finance comparison sites like uSwitch to compare the best car finance rates or car loan deals.

Car finance deals or car finance loans are repaid over years. Longer term car finance deals will come with lower monthly repayments, but tend to be more expensive overall.

The best car finance loan for you maybe the one with the cheapest monthly repayments. Make sure you can afford every repayment.

How to apply for car finance loans

You can apply for car finance loans at your car dealership. To apply for car finance you will need certain documents and information. This includes:

  • Previous addresses

  • Proof of ID

  • Details of your income

How much will a car loan cost?

Car finance loan companies charge interest on the loan. This is the APR. Look out for this number on car finance loan comparison sites to get the best car finance loan rates.

Costs included in the APR are the interest rate you will pay the lender for the car finance loan, and any extra charges. The APR you are offered will determine how much your monthly repayments will be.

However, the APR you are offered depends on a number of factors such as your credit history, your income and the amount of car finance you’re looking for.

To get the cheapest loan rates and the best car finance deals you will need a good credit history with a sufficient income that assure the lender that you can afford the repayments. This is why it's best to only borrow what you can afford to pay back for the whole term of the loan.

What should you consider before getting car finance

Lease terms

Car finance contracts come with terms you must stick to.

For example, if you want to make any physical changes to your car, you’ll need to get it approved from the car finance company.

You're also required to pay for any repairs the car needs when you return the car.

Lease limits

You’ll have to pay extra if you go over the agreed mileage limit. Car finance companies charge around 10p a mile for this. It may be cheaper for you to choose a car finance deal with higher mileage limits than go over.

Gap insurance

Gap insurance covers the ‘gap’ between how much you have paid for your car and how much an insurance company would pay out if it was stolen or damaged beyond repair.

Car salesmen will try hard to sell you gap insurance. But you're likely to get a better deal on gap insurance from third party providers. Find out more about how gap insurance works.