Car finance

Car finance is a credit agreement between you and a lender that enables you to buy a car.

There are a number of different car finance types including:

• A personal loan
• Lease
• Hire purchase
• Personal contract purchase (PCP)

If you don't have the cash to buy a car outright it's important to think about the right car finance option for you. Each option is different and only with a personal loan will you fully own your new car from the get go.

The easiest way to get started is to fill out our form and get a quote.

Like most financial products, you’ll have to be over 18 to apply. Some lenders will have their own requirements so it’s best to get in contact with them if you have any questions before applying.

Yes. Once your finance deal has been approved in principle, you're free to choose your car, whether it's brand-new or second-hand.

When looking for a deal, we'd recommend finding something that suits your financial situation best in terms of affordability. For example, taking out a car loan might suit your circumstances as you can spread the cost of repayment over a few years. Or you might find that a PCP deal suits your finances better and choose to go down that route.

Whichever product you choose, make sure to do your research first to find your best deal.

This will depend on the lender and the terms and conditions of your deal. Some lenders will allow you to make higher monthly repayments or allow you to pay back your loan in full, but you may be charged early repayment fees. If in doubt, it’s always best to speak to the lender first.

The maximum amount you can borrow on a car finance deal is £36,000 or £50,000 with a personal loan. The amount you can personally borrow will depend on a few factors such as personal circumstances and your financial and credit history.

By getting a quote, it’s easy to see if you’re eligible for car finance within minutes. You just need to enter some basic information that allows lenders to carry out a soft credit search to see if they can offer you a good deal. This doesn’t affect your credit rating.

It can take up to a couple of days for you to get approved for a car loan. How long it takes to be approved varies depending on the lender, the type of deal you’ve chosen and the type of car you want to buy.

If you’re experiencing repayment difficulties, it’s always best to speak to your lender as soon as possible. They may be able to help in some way and offer you options on how to proceed. Missing repayments can have several negative effects. These include, harming your credit score, leaving a permanent mark on your credit history or you could get a County Court Judgement (CCJ) against you. You may also find it difficult to borrow in the future and any loans you do take out will likely be more expensive.

Typically, you’ll see mileage restrictions on PCP deals. This is where you and your lender will agree a maximum amount of miles over the course of your PCP agreement. Depending on the lender, if you go over this amount, there may be an excess charge you’ll have to pay. To avoid any penalties, it’s always best to allow yourself some breathing room in your mileage allowance.

When you get a quote for a car finance deal, for CarFinance 247 to see which of their lenders will make you an offer, a soft credit check is run. A soft credit check or soft search is a type of credit search that is a way of finding out how eligible you are for a loan, without leaving a mark on your credit report.

Part exchanging your car is where your dealer agrees to take your old car as a deposit and reduce the purchase price (or monthly payments) of your new car.

You can still part exchange if you are buying your car online. Some online dealerships offer a part-exchange service where they will give you a valuation for your old car and take it away when your new car is delivered.

Once you’ve paid 50% of the amount payable, legally you have the right to voluntarily terminate (VT) your car finance agreement. Each finance company will have different terms and conditions. But providing you’ve kept up payments and paid a final agreed sum, you can give the car back and end your contract.

The car will have to be in a reasonable condition – if not, there may be some extra charges when you return it.

Representative APR is the figure lenders use to advertise the interest rates on their loans.

The representative APR should be representative of what the lender reasonably expects customers to enter into as a result of the advertising and should meet the 51% test. The 51% test assesses whether the majority of their customers get this APR rate. Only once a credit check has been carried out will you find out the exact APR that will be applied to your loan. This rate may be higher or lower than the representative APR.

Any lender will want to see that you have enough money to repay your loan. This means it's harder to get car finance if you don't have a job. But you may still be eligible if you can prove that you have an alternative source of income (from a rental property or pension for example) and can afford your monthly repayments.

You can only sell a car if you are its legal owner. That means it's fine to sell a car that you have bought with a personal loan, even if you are still repaying it.

But if you have a lease on your car, or you're on a hire purchase or PCP plan, you won't legally be able to sell it because you don't actually own the car yourself.

Each lender will make its own decisions around who it will lend to. That means there is no minimum credit score you need to be eligible for car finance.

Generally though, you will need a good credit score to be eligible for car finance from mainstream lenders. If you have a bad credit score you may have to use a lender that specialises in lending to people with poor credit histories and pay a higher rate of interest.

A reputable dealer is a dealer who you can trust – they have a good customer base, and will be professional in manner. You get peace of mind when looking for car finance deals through CarFinance247 as they only work with reputable dealers.