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Car Finance Explained

Car finance explained: How to pay for your new car

What is car finance?

Car finance is a way of paying for a car over a period of time, rather than in one lump sum. It’s a popular option and suits buyers who would rather spread the cost of a car that might otherwise be unaffordable to them.

What finance options are available?

You have several options available when it comes to car finance but the most popular options are Hire Purchase (HP) and Personal Contract Purchase (PCP).

Both options give you the option to pay for your car in monthly instalments, typically ranging from a period of 12 to 60 months. However, there are differences to both HP and PCP and you should read the terms carefully to find out which option is most suitable for you.

You can take out a finance agreement on new and used cars, and finance is typically offered by specialist finance companies and car manufacturers. The loan interest rates vary depending where you get your loan from, and your current credit score can impact whether you are accepted for finance or not.

What is Hire Purchase?

Hire Purchase is a finance option designed to help you spread the cost of paying for a car over a period typically between 12 and 60 months. Once you have paid your final agreed instalment, you will own the car.

This option may be preferable as you will not be faced with mileage caps or penalties for wear and tear damage to the car, as you will be the legal owner of the vehicle at the end of your HP arrangement. You will need to be aware that you will not own the car until you have made all repayments due to your hire purchase agreement – this will be outlined in your arrangement.

What is Personal Contract Purchase?

Personal Contract Purchase is a finance option designed to help you spread the cost of a car typically between 12 and 48 months, with the flexibility to hand it back at the end of your agreement.

Once your PCP arrangement has ended, you can either:

  • Buy the car outright for the price of its Guaranteed Minimum Future Value, set out at the start of your PCP arrangement
  • Hand the car back and walk away without further payments (subject to any mileage or wear and tear charges outlined in your arrangement)
  • Get a new car on a new PCP deal


You should be aware that if you exceed any mileage caps or if the car is returned in a condition that is deemed ‘unfair wear and tear’ you could be charged additional fees. This will be outlined in your PCP arrangement.

How can we help?

We are experts in providing bad credit car finance options and we have helped thousands of people get on the road. If you have a poor credit history or have previously struggled with debt, we can still offer hire purchase motor finance at a competitive 19.9% APR Representative, subject to status.

We can help you get car finance today, even if you:

  • Have no deposit
  • Are in an IVA/DMP
  • Have a CCJ
  • Have previously been declared bankrupt

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