How to Purchase a Car on Finance The Easy Way

For many drivers, the purchase price of buying a car outright is too expensive. More drivers rely on some form of finance or loan to help fund their next car purchase. Car finance can be helpful for many, but it also can’t be promised to every person who applies for finance.

Due to strict lending criteria and the rules of responsible lending, lenders can’t promise finance to all. If someone can’t afford to pay their finance back or they have had trouble in the past with sticking to credit agreements, they may not be suitable for future finance.

If you’ve never had a car in finance before or you’ve chosen the wrong agreement in the past, the guide below is here to help! There are a few considerations to remember before you even apply for finance to help assess whether you’d be eligible for car finance and help get you the best deal possible.

What is Car Finance?

Car finance is when you borrow money from a lender to fund a car purchase. Your loan amount is calculated on how much you borrow plus any additional interest or fees minus any deposit contribution you make. There are a number of finance agreements to choose from and you may be suited to one form of finance over another. You can use car finance to buy a brand new or second-hand car and pay for it over a term that suits you. You can choose a loan term to suit your monthly budget and pay for the finance over a number of years. Usually car finance deals last between 3-5 years but can be tailored to your affordability.

Where Can I Get Car Finance?

There are now a number of ways in which you can secure a finance deal. You can head straight to the car dealer and apply for finance, if they offer it, through their dedicated lending panel. Only car dealers who are verified by the Financial Conduct Authority can offer finance customers and you can check the status of a dealer on the FCA website. When applying for finance on a car at the dealer, you may be limited to the options on their panel, and it may be harder to obtain finance with a bad credit score.


You could also consider financing a car through an online broker. Brokers help the customer to find a suitable car finance deal from a wide range of lenders. Brokers don’t usually charge a fee to the customer and instead gain commission from the lender for the introduction. Online car finance brokers are becoming more popular as they usually have access to many lenders at once and can compare multiple deals to help find customers the lowest rate. Once you’re secured finance from a lender, you can choose a car within your budget from any FCA approved dealer.

Essential Tips For Getting The Most Incredible Car Finance Deal

Check Your Credit

Before you can be considered for car finance, you will need to have a credit check performed on your credit file by a lender. Lenders want to know what your credit history looks like and how well you can handle your finances. Missed or late payments in the past can leave you with a bad credit score. Lenders can be put off by bad credit scores as its more likely you will default on your loans or finance in the future too. If you’ve bad credit due to no credit, lenders can’t predict which type of borrower you’ll be and may also decline your application on this basis. People with good and excellent credit scores can see easier acceptances and lower interest rates. It can be worth improving your credit score in the run up to your car finance application to help get a better deal.

Work Out Your Affordability

The next thing you need to know is whether you can actually afford to finance a car or not. Your monthly budget for car finance payments needs to realistic and manageable each and every month. If you fail to pay, the lender can have the right to take the car off you and it can harm your ability to get finance in the future. You should assess your current income and outgoings and see how much you could comfortably put towards your finance payments. As a general rule, you should not spend more than 10% of your monthly income on car finance payments.

Check Your Eligibility For Finance

Many lenders are now offering the ability to check your car finance eligibility before you apply. This can help to save time to see which lenders would consider you before you make a full application. Car finance lenders set their own individual criteria which applicants need to meet, and finance can never be guaranteed to anyone.

Research The Types of Finance on Offer

Car finance isn’t a one size fits all agreement and there are a few different ways to finance a car. You can choose between hire purchase, personal contract purchase and a personal loan option. Both Hire Purchase and Personal Contract Purchase are forms of secured loan which means the lender owns the car throughout the agreement until the end of the deal.


This means the lender can take the car off you if you fail to pay. Personal loans are unsecured loan which means the lender doesn’t own the car, but personal loans can be harder to obtain if you have a low credit score. It can be worth taking some time to explore each in more detail to see which is right for you.

Jeremy Edwards
Jeremy Edwards
On Chain Analysis Data Engineer. Lives in sunny Perth, Australia. Investing and writing about Crypto since 2014.

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