Not sure what finance is right for you?
We’re here to help. This handy table should aid your decision.
|Hire purchase||Personal contract purchase||Personal loan|
|Requires initial deposit||Hire purchase Usually requires deposit||Personal contract purchaseUsually requires deposit||Personal loan|
|You own the car outright||Hire purchase||Personal contract purchase||Personal loan|
|Car is yours at the end of the agreement||Hire purchase||Personal contract purchase||Personal loan|
|Fixed monthly payments||Hire purchase||Personal contract purchase||Personal loan|
|Optional balloon (final) payment||Hire purchase||Personal contract purchase||Personal loan|
|Excess mileage charges||Hire purchase||Personal contract purchase||Personal loan|
|Secured against an asset (eg car)||Hire purchase||Personal contract purchase||Personal loan|
Personal Contract Purchase (PCP)
Personal contract purchase or PCP is similar to a hire purchase. You’re likely to be asked to pay an initial deposit, and then monthly payments for a set period. The higher your deposit, generally, the lower the monthly payments. Even with the deposit though, monthly payments are typically lower than you’d find with a hire purchase deal or a personal loan. This is because you'll be paying off the value of the depreciation of the car, not the full value of the car.
At the end of the agreement, if you decide you want to keep the car, you’ll need to pay what’s known as a ‘balloon payment’. This covers the cost of the vehicle and transfers ownership from the finance company to you. If you don’t want to keep the vehicle, you can give it back, or start a new PCP deal and get a new car.
Hire Purchase (HP)
Hire purchase or HP is an arrangement where you hire the car from a finance company until you’ve fully paid for it. The finance company own the vehicle until the final payment is made, after which time it’s yours to keep. Hire purchase tends to require a deposit usually 10% of the car’s value. The higher the deposit, the lower the monthly payments.
A personal loan sometimes called an unsecured loan, allows you to borrow a lump sum over a fixed term. This loan isn’t secured against anything. That means if you use a personal loan to pay for your car, you’ll own it outright from the day the money is transferred to the dealer. As such, you can sell the vehicle at any time, without needing to settle up with the finance company first.
Unlike many sites, once you’ve entered your details we’ll be able to show you the exact APR that you’ll be offered for your loan or hire purchase deal - what you see is what you get.
As well as showing you options for exact APR, we’ll show you providers who quote based on representative APR and display the likelihood of acceptance too. Our guide on representative APR vs exact APR explains the difference.
Knowing the exact APR means it’ll be easier to manage your budget and make sure you get the best deal.
Easy and simple to use, exactly what you need when looking for car finance!
When you take out a hire purchase agreement, you may be asked to pay a deposit and the finance company will own the vehicle until the final monthly payment.
If you use a loan to pay for your new car, you’ll own it outright from the day the money is transferred to the dealer.
Using a personal loan to pay for a new car also means you aren’t restricted where you can buy the vehicle from.
Often HP deals will state that you’ll need to buy the car from a reputable dealer, so you won’t be able to use it for a private sale or potentially smaller dealers.
Before taking out car finance, 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.
You’ll need to ask yourself a few questions before you start, such as:
- How much can you afford to pay back each month?
- How much do you want to borrow?
- What is your credit history like?
- How long do you want to keep the car?
You can then make sure you’re getting the best deal by comparing all of the options available, and making your decision based on your own circumstances.
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.
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.
Need more help? Take a look at our car finance FAQs.
- Your current UK address
- A contact phone number and email address
- Annual income
- General outgoings
Searching for car finance on Confused.com will not affect your credit rating as only soft searches will be carried out.
What is APR?
Annual percentage rate (APR) is the total charge for borrowing, including any fees and charges for that lending. We will show you either an exact APR or a representative APR. Exact APR means the rate you see will be the rate you get. Representative APR is an advertised rate that at least 51% of people who are accepted for the product will pay.
Can you buy second-hand cars on finance?
Yes. When you search for car finance with Confused.com just pop in the registration number of the car you’re looking at, then you can compare quotes from our list of top UK dealers.
Can I get car finance if I have bad credit?
If you have a poor credit history, you can still apply for car finance – the company will look at your personal circumstances, such as your employment status, age, income and loan size, alongside your credit history . You’ll then get your exact interest rates and payments.
What’s the difference between representative and exact APR?
Representative APR is the figure companies use to advertise their rates. Only 51% of people are actually required to receive the advertised rate. Exact APR is the rate you'll be offered by the lender after your information has been checked.