Car finance

The term car finance covers several types of loan you can take out when purchasing a car. Most deals require an initial deposit followed by set monthly payments.

By spreading the cost over time, it's a great way to avoid paying for a car all in one go. Much like other types of loan, interest rates tend to apply, as well as extra fees. This makes shopping around for the right deal vitally important.

Looking for a car finance deal?

If you're unsure whether personal contract purchase, hire purchase or an unsecured loan is the best car finance option for you, take a look at our explanations below.

Before taking out a car loan, you need to take into account how much you’re spending, how much you can afford to pay back each month and how good your credit history is.

The great way to compare deals is to look at the total cost of credit as this will take into account the monthly payments, and how long you’ll end up paying back the loan for.

One thing to be careful of when comparing finance deals is that, while extending the period of a loan may bring down the cost of monthly payments, it could also mean you’ll pay more interest overall.

Your credit history is taken into account when you apply for car finance.

But even if you have poor credit, or you are completely new to it, it doesn’t mean you’ll be rejected, or that your only option is to take out finance through a car dealer.

Instead, it will probably mean that your monthly payments and / or the amount you repay overall are higher than some of the rates you’ve seen advertised.

And you may only get quotes from a limited number of “specialist” providers.

Take a look at our guide on how to improve your credit rating.

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

Before you start looking for a car loan, you'll need to think about a few questions, such as:

• Do you have any savings for a deposit?
• How much can you afford to pay back each month?
• How much do you want to borrow?
• 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.

Need more help? Take a look at our FAQs or our car finance jargon buster.

• Your current UK address
• A contact phone number and email address
• Annual income
• General outgoings

Using Confused.com will not affect your credit rating as only soft searches will be carried out.

Confused.com is a credit broker, not a lender. Our website makes it easy for you to compare a wide variety of car finance products, all from a range of trusted providers. If you decide to buy through us, we get a small fee from one of these providers. Comparing with us costs you nothing! And please note, the size of the provider’s fee doesn’t affect how we display our products.

When you get a car finance quote from us, you'll see a number of products offered by our providers/lenders. To get to this stage, we run what's called a soft credit search.

This type of credit search doesn't affect your credit score and is also not shared with potential lenders, just the broker (us).

The only time your credit score and history is shared with a lender will be when you choose to purchase a car finance product and the lender you've chosen to purchase from will then conduct a full/hard credit check.