Car Finance Guide & Calculator

Understand your finance options and calculate your monthly payments

Finance Calculator

Types of Car Finance

How it works:

You pay a deposit followed by fixed monthly payments. You own the car at the end of the agreement.

Pros:
  • Fixed interest rates
  • You own the car at the end
  • No mileage restrictions
  • Can sell once paid off
Cons:
  • Higher monthly payments than PCP
  • Can't sell during agreement
  • Car can be repossessed
  • No flexibility at end

Best for: People who want to own the car and keep it long-term

Typical APR: 4-10%

How it works:

Lower monthly payments with a large final "balloon payment" if you want to keep the car.

Pros:
  • Lower monthly payments
  • Flexibility at end of term
  • Option to return the car
  • Can upgrade regularly
Cons:
  • Mileage restrictions
  • Must maintain condition
  • Large final payment to own
  • More expensive overall

Best for: People who like to change cars regularly

Typical APR: 5-12%

End of term options:
  1. Pay balloon payment and keep the car
  2. Return the car (subject to condition and mileage)
  3. Part-exchange for a new PCP deal

How it works:

Borrow money from a bank or lender to buy the car outright. You own the car immediately.

Pros:
  • You own the car immediately
  • No mileage restrictions
  • Can sell anytime
  • Shop around for best rates
Cons:
  • May need good credit score
  • Loan not secured on car
  • Full amount borrowed upfront
  • No protection if car fails

Best for: People with good credit who want immediate ownership

Typical APR: 3-15% (depends on credit score)

How it works:

Long-term rental where you never own the car. Return it at the end of the agreement.

Pros:
  • Lowest monthly payments
  • Always drive newer cars
  • Road tax often included
  • No depreciation worries
Cons:
  • Never own the car
  • Strict mileage limits
  • Charges for damage
  • Can't modify the car

Best for: People who want low payments and don't need ownership

Monthly cost: Typically 20-40% less than HP

Understanding Interest Rates

What is APR?

APR (Annual Percentage Rate) is the total cost of borrowing over a year, including interest and fees. It's the best way to compare different finance deals.

Factors Affecting Your Rate
  • Credit Score: Higher scores get better rates (typically 3-6% APR)
  • Deposit Size: Larger deposits reduce risk and improve rates
  • Loan Term: Shorter terms often have lower rates
  • Vehicle Age: New cars typically get better rates
  • Income: Stable, higher income improves rates
Representative APR vs Personal APR

Representative APR is the rate offered to at least 51% of successful applicants. Your personal rate may be higher based on your circumstances.

Tips for Getting the Best Deal

Before Applying
  1. Check Your Credit Score: Use free services like Experian or ClearScore
  2. Fix Credit Issues: Correct errors and pay off small debts
  3. Save a Larger Deposit: Aim for at least 10-20% of vehicle price
  4. Compare Multiple Quotes: Don't accept the first offer
  5. Read the Fine Print: Check for fees and penalties
Negotiation Tips
  • Negotiate the car price separately from finance
  • Get quotes from banks before dealership finance
  • Ask about manufacturer finance offers
  • Consider paying a larger deposit for better rates
  • Check for early repayment penalties
Red Flags to Avoid
  • Pressure to take dealership finance
  • Very long loan terms (over 5 years)
  • Payment protection insurance add-ons
  • Variable interest rates
  • Excessive fees and charges
Quick Comparison
Type Monthly Own?
HP £££ ✓
PCP ££ Option
Loan £££ ✓
Lease £ ✗
Need Help?

Our finance experts can help you find the best deal for your situation.

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Important

Missing payments can affect your credit score and may result in repossession. Always ensure you can afford repayments before committing.