Car Loan and finance in United Kingdom, Guides and more
Car finance oof course offers a way to help people buy cars that they couldn’t normally pay for up front. Typically, you’ll pay a deposit, then the rest in monthly repayments (with interest) over a fixed term.
This could be from one year up to five years. The length of the term you choose will determine how much your monthly repayments are. A longer term means lower monthly repayments, however, it could cost you more in the long run as you’ll be paying more interest overall.
There are various options to choose from when comparing car loans, so we’ll help you understand what’s on offer.
What types of car finance are there?
When choosing between car finance options, it’s important to understand what options are available to you. There are several choices to choose from to finance the purchase of a car, with suitability depending on your individual needs and circumstances, which Compare the Market’s eligibility checker helps with:
Hire purchase (HP) – with this type of car financing, you spread monthly payments over a set period of time. Once you’ve made the last repayment, the car is yours to keep. This type of car finance is typically only an option when buying through a car dealer, however there are some exceptions.
Personal loans – a personal loan offers a fixed amount to borrow, over a fixed term and, usually, a fixed interest rate. You should know exactly what you’re getting with a personal loan, so you can plan your money and spending around it.
However, most lenders offer personal loans up to £25,000. Loan terms can vary between finance providers, but there’s flexibility in how long you can pay off your car finance. When choosing the loan term, decide how soon you can realistically pay the money back, without stretching yourself too thinly.