Save on car finance

Looking to buy a new car? We can help you make the right choice

Compare finance

How can I save on car finance?

There’s no hard and fast rule with car finance – what suits some people might not be the best option for others. There are lots of factors to take into account, from your budget, to your credit history and the car you’re buying. You can make sure you’re getting the best deal by comparing all of the options available, and making your decision based on your own circumstances.

We’ve pulled together personal loans, credit cards and dealer finance… But you’ll also need to consider the part-exchange value of your current car, and if you have any savings.

What is a car loan?

It’s a personal loan that you take out in order to buy a new car. You borrow a lump sum between £1,000 and £35,000, and use the money to buy the car outright. The car is then yours to keep.

The loans you compare at Confused.com are unsecured. In other words, you won’t be securing the loan against your home or car, so the lender won’t be able to repossess your home if you don’t keep up on payments.

Terms may vary between providers and depend on how much you want to borrow, but typical term lengths range from one to five years. Some providers could offer terms of up to 10 years.

Why compare car loans with Confused.com?

Providers offer variety of interest rates and different benefits. We present your options in a manner that's easy to digest.

And by comparing a range of UK providers in one go, we could save you time. So you can easily find our best deals, and be that much quicker in getting your dream car.

Is this the same as car finance?

No – car finance and car loans are different from one another. Car finance often involves leasing the car while you make monthly payments, with the option to buy the car outright at the end of the term. This usually requires an initial deposit, and the finance company owns the car until you make the final payment.

Using a personal loan to buy a car means you don't have to put down a deposit. Plus the car belongs to you throughout the term, even while you're making repayments.

Why would I choose car finance?

Traditionally offered at the dealership, car finance can often be a good way to buy a new car. You’ll typically be able to choose between hire purchase (HP) or personal contract purchase (PCP) deals, where you’ll need to pay a deposit and agree the length of term.

Choosing between HP or PCP is usually a simple decision. It tends to boil down to: are you likely to want to hand the car back at the end of the term? With a hire purchase deal, at the end of the agreement you own the car outright. Whereas with a personal contract purchase deal you have the option of either handing the car back at the end of the term, or making a final payment to keep the car. This is typically called a balloon payment. It’s because of this that PCP monthly payments are usually lower than HP payments.

Typically you won’t be able to get car finance on cars over nine years old, or valued at less than £1,000. But it’s worth checking with the dealer.

Why would I choose a credit card?

For some circumstances, a credit card could be the cheapest way to pay for a new car. Plus, as with any purchase on a credit card for something worth between £100 and £30,000, you’ll also have Section 75 protection. This protection means that the credit card company is jointly liable with the seller, so if the car is faulty you can approach the credit card company to put it right.

There are many cards that could be used to buy a car, but it’s usually a choice between a money transfer card, a purchase card or a low rate card. A money transfer card allows you transfer cash to your current account, so you can pay cash in places that won’t accept a credit card. As you won’t be paying for the car with the card directly, you won’t be covered the Section 75 protection mentioned above.

A purchase or a low rate card can be used to pay for the car directly. The money doesn’t need to go to your current account first. However, you’ll need to make sure that your credit limit is enough to cover the cost, and that the dealer accepts card payments. Your credit history is taken into account when card companies calculate how much they’ll lend you. So the better your credit history, the more likely you are to have a larger limit. Even if you’ve already got the cash in the bank, some people use a credit card for large purchases, purely for the Section 75 protection, then pay off the balance in full before any interest is incurred.

It’s important to note that if you do choose to buy a car with a credit card, you need to stick to the repayment terms. Otherwise it could cost you considerably more. If you’ve chosen to use a card with a zero percent period, once the period ends the rates rise considerably and the rate becomes variable. Paying off the balance before the zero percent period ends means you won’t have to worry about this. If you only make the minimum payments it could take a considerably long time to pay for the car, so it’s worth being disciplined and ensuring you pay the balance as soon as you can.

Getting started

Understanding your options

Everyone has a different financial situation, so there's no 'one size fits all' with financing your next car.

To decide the right option for you, it helps to take several factors into account:

  • Do you have any savings for a deposit?

  • What's your credit history like?

  • Are you likely to change your car again within the next three years?

  • Have you chosen the car yet?

  • Is it a private sale, or through a dealer?

  • How much are you looking to spend?

Once you’ve answered these questions, you’ll be in a much better position to choose the best way to finance your next car.

Choose the right option

Once you've chosen which type of finance you want, it's time to narrow down the exact deal you'd like to apply for.

Comparing the features of each option:

  • Loans – choose the amount, and term to suit you. You’ll usually get the cash in your bank account, so you might have more buying power.

  • Personal contract purchase – allows you to hand the car back at the end of the term, with an optional balloon payment if you want to keep the car.

  • Hire purchase – you’ll own the car at the end of the term, with no extra final payments, so monthly payments are often higher than with PCP deals.

  • Money transfer credit cards – transferring money to your current account means you can combine it with any savings you have to pay cash for your car.

  • Purchase credit cards – with some cards offering over two years interest-free on purchases, if you don’t get charged a fee at the dealer, this could be a way to buy a car without paying any interest. You could also get Section 75 protection, read about it in our guide.

  • Low rate cards – if you’re looking to borrow smaller amounts, but are worried about forgetting when a zero percent deal ends, these cards can be a great alternative to a loan. As with using a purchase card, you could be covered by Section 75 protection.

As soon as you’ve picked the option that’s most suitable for your financial situation, if it's available through our website, you can apply online.

What you'll need to apply

When you’re ready to start your application, use the apply button and you’ll be taken to the provider’s application process.

You'll need:

  • Your current UK address details.
  • A contact phone number and email address.
  • Bank account details.
  • Details of your annual income.
  • If you’ve chosen a specialist car loan, you’ll need details of the car you’re buying.
  • Once you submit your application, the provider will let you know if you've been accepted or not. Sometimes this’ll be instantaneous. Other times, you may have to supply some more information before a decision is made.

    You should know that applying for too many credit products, especially in a short space of time, could have a negative effect on your credit score. Each application will show up on your credit history.

Looking to buy a new car?

Listings are provided by Inspop.com Ltd on a non-advised basis. This means that no advice is given or implied and you are solely responsible for deciding whether the product is suitable for your needs. If you are not sure which is the right product for you, you should seek advice. Inspop.com Ltd is acting as a credit broker, not a lender. You will not be charged a fee for using this service, but you should check with your chosen provider to find out what fees may be applicable. Inspop.com Ltd may receive a payment from the product provider you select in the table.