What is the Best Way to Finance a New Car?

Red headed lady on laptop looking for the best way to finance a car

What’s the best way to finance a new car? If you don’t quite have the funds to buy a new car outright, you’ll be asking yourself this very question. In truth, there are several options, so it’s important to find the one that’s best for you.

Read on as we look at four of the best ways to fund your big purchase. But first…

Why would you finance a new car?

Whether it’s the fresh smell of the interior or the flawless touch of the steering wheel for the first time – nothing beats that new car feeling. While the most obvious way to pay for a new car is using your savings, not all of us have all of the funds needed up front.

Even for those who do have some savings put aside, it’s not always the best route. You might prefer to keep your savings for a rainy day and pay for the car gradually over time. That’s where car finance comes in. Financing a new car essentially means borrowing money so you’re able to afford a new car, then paying it back once you’ve got your new wheels.

Popular ways to finance a new car

Whether it’s brand new or just new to you, there are actually a number of ways to afford a new car. Here are some of the most popular:

1.    Bank loan

When you need money, it’s only logical that many people’s first stop is the bank. While it works for some people, this option could be a bit too long-winded for some of the more eager drivers out there.

After a face-to-face meeting to discuss your loan, the bank will ask for seemingly endless documents to get your application sorted. They’ll also perform a full credit check, which could damage your credit score.

2.    Car finance through the dealership

Another option is to get car finance directly through a dealership, which has two possibilities:

  • Hire purchase – After paying a deposit of typically around 10%, you’ll make monthly repayments until the car has been fully paid off.
  • Personal contract purchase – Alternatively, you can pay lower monthly instalments, leaving a final (larger) balloon payment at the end of the contract.

On the face of it, this seems very convenient. After all, you’d only have to make one stop when you’re buying your new car. However, like a bank, many of these dealerships will also do a hard credit check, which could put a dent in your credit score.

On top of that, because you’re borrowing directly from the dealership, the car isn’t technically yours until the full loan is repaid. For some, that can put a serious blemish on the ‘new car feeling’. In some cases, dealerships will also enforce an annual mileage limit or stop you making any modifications to your vehicle as you don’t technically own it.

3.    Personal loan

Maybe you know someone who’s got a bit of spare cash, that could help you afford a new car. This option has clear advantages. Borrowing off a friend or family member usually means no interest – and even the most scrupulous relative or friend isn’t likely to perform a hard credit check.

However, ask anyone who’s gone down this route, and they’ll likely warn you off. Aside from feeling like a burden, borrowing off someone you know means you’ll constantly be in their debt. Enjoy giving them lifts everywhere…

If you’re ever late in paying or can’t repay them, you could even see your relationship ruined completely. It’s just not worth it when there are other ways to finance a new car.

4.    Online car finance

One of the best ways to finance a new car is with online car finance. You can arrange your car finance before you’ve even found your car, then simply choose the car you want from any car dealer. Rather than borrowing directly from the dealer and paying them off gradually, the money will be transferred immediately to them so your car is completely yours the day you buy it.

There’s no hard credit check, meaning no impact on your credit score – and there’s much more flexibility for applicants with poor credit scores, who might be rejected by banks or car dealerships.

Car credit made easy

At My Car Credit, we want to make it easy for drivers to be able to afford a new car. Using our online loan calculator, you can get an instant estimation for your car finance based on the price, repayment duration and a rough idea of your credit score.

Based on the result, you can then choose to apply for finance or give it a miss – there’s no obligation either way. Best of all, there’s no impact on your credit score.

If you have a poor credit history, don’t worry – we can help with a bad credit finance too. Give it a try today to take the first steps towards that new car feeling!

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

What is a Guarantor Loan?

Man hugging his dad after securing a guarantor loan

At My Car Credit, we understand that affording a car can be a challenge. A Guarantor Loan, where a third party agrees to pay your loan if you can’t make repayments, provides an alternative method of taking out car finance. A Guarantor Loan is a big responsibility so it’s important you understand everything that’s involved in taking one out. Here’s everything you need to know about applying for a Guarantor Loan.

Representative APR 23.9%

How it works

A Guarantor Loan is the same as a normal loan and you are still responsible for making the agreed repayments. However, it also allows for a third party (normally a family member) to guarantee your lender the repayments (in case you fail to make them).

Picking a guarantor

Your guarantor can be anybody between the ages of 18 and 75 with a regular income – they don’t necessarily have to be a homeowner, but this would greatly increase your chances of being accepted. Due to the nature of a Guarantor Loan, it’s a good idea to make sure that your guarantor is somebody who trusts you to make the repayments, as well as somebody that you have a good relationship with. Being a Guarantor is a big responsibility – in the eventuality that you cannot meet your repayments, your Guarantor would be liable for the debt instead. Most people tend to ask a member of their family or a very close friend.

What they’ll need to provide us

Your guarantors will have to go through the same checks and processes as you – they will need to provide their employment and financial history (i.e. income, bank statements, bank details), their proof of ID, and potentially other documents, dependent on the lender’s criteria. This is a standard procedure to reassure the finance lender that your guarantor is a suitable choice.

Once you and your guarantor have been accepted and all the boxes have been ticked, most Guarantor Loans are paid out to you within 48 hours.

Additional advantages

The security of a Guarantor Loan for the lender means that you may be offered a lower annual percentage rate (APR) than you could obtain elsewhere. An APR is the money you have to pay in interest for borrowing money from a lender.

A Guarantor Loan means that you can build and improve your own credit score for the future, because (in theory) you should always make the monthly payments. This means that your chances of being approved for finance will be improving as you go along.

Choosing to take a Guarantor Loan can make it more likely for you to be accepted for car finance. Put simply, this is because having a guarantor makes you a much safer bet for a lender. It gives them a reliable back-up option that they can approach for payments.

What happens if you fail to make the repayments?

Failure to make your monthly repayments will mean that your Guarantor will be liable instead. They will be expected to make the monthly repayments on your behalf. Should they also fail to make the repayments, both of you could be issued with a County Court Judgement (CCJ). This will impact both your credit profiles, as well as affect your abilities to obtain credit in the future.

A Guarantor Loan can be a good solution for certain circumstances but it’s important to remember your obligations to both your Guarantor and the lender.

Ready to take the next step?

If you feel that a Guarantor Loan is the best option for you, why not call one of our Guarantor Loan specialists at My Car Credit – they will be more than happy to help you through the quick and easy process. Or click and apply here with My Car Credit to see if you are eligible.

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Car Finance vs Personal Loan, what’s best for me?

Car dealer handing over the keys to car bought on finance

If you’re looking to buy a nearly-new or used car and considering taking out a finance agreement, you’ll probably already know that there are a few options available to you. At My Car Credit, we want to make this choice easier with our no-nonsense lowdown on car finance options. Whichever option you choose, we are here to take care of it!

Personal Loan

In short: You borrow a lump sum from the lender to buy the car, which means you own the car from the start of your contract. You then repay this money (with interest) at a set monthly rate within an agreed time limit, usually between 24 and 60 months.

Pros:

  • Your interest rate is fixed and lower than other options where your credit score is good
  • Your monthly repayments are fixed, so you can budget around them
  • You own the car from the start of the contract
  • You can choose the time limit of the loan

Cons:

  • Your interest rates can be higher if you have a poor credit score
  • You are entirely responsible for the car and all repairs
  • You have to borrow over £1,000

Ideal for people:

  • Who want to own the car from the start of their contract
  • Who want flexibility with their repayment structure
  • Who are looking for lower interest rates

Eligibility

Most people will be eligible to take out a Personal Loan. However, those with a bad credit score or those with a bad credit history (especially those that have CCJ court orders against them) may be declined.

At My Car Credit, we work closely with a number of trusted Personal Loan funders. You can make an application on our website to determine your chances of being accepted and because we only carry out a ‘soft search’, there will be no trace left on your credit file.

Hire Purchase

You put down a deposit on a car and the lender pays for the rest. You then ‘hire’ the car from the lender until you have paid off your monthly repayments, at which point the car becomes yours. Your monthly repayments are paid within an agreed time frame, usually between 12 and 60 months, and will differ dependent on how much deposit you put in.

Pros:

  • The repayment time limit is more flexible
  • Your interest rate is fixed, and will be lower depending on your deposit amount
  • You are more likely to be accepted if your credit score isn’t the best

Cons:

  • You don’t own the car
  • You have to pay a deposit
  • There can be additional fees (such as a transfer of ownership fee at the end of the contract)

Ideal for people:

  • Whose finances and circumstances are suited to fixed monthly repayments
  • Who don’t have the best credit rating
  • Who want to own the car at the end of their loan
  • Whose disposable income could change (e.g. starting a family, changing jobs)

Eligibility

Hire Purchase agreements are one of the more accessible car finance options. Although not everyone is accepted, there is normally a broader spectrum that this option will cater for, i.e. credit profiles that range from excellent to poor, and several employment statuses, including retired, young professional and self-employed.

At My Car Credit, we have access to a large panel of lenders that offer excellent Hire Purchase agreements. You can make an application on our website to determine your chances of being accepted and because we only carry out a ‘soft search’, there will be no trace left on your credit file.

Personal Contract Purchase (PCP)

You borrow the difference between what the car costs when you take out the loan and what it will cost at the end of the loan. This is called a Guaranteed Future Value (GFV). In other words, if the car costs £3,500 at the start of your loan and will cost £1,500 at the end of your loan, you need to borrow £2,000. The GFV also includes your estimated mileage as a factor. Normally this kind of loan will last between 18 and 48 months. At the end of your loan, you have three options: buy the car by paying what it costs at the end of your loan, give the car back and settle the loan, or part exchange for a new car.

Pros:

  • Your options are more flexible at the end of your loan
  • Service and maintenance packages, as well as warranties and insurance, are normally included
  • You could drive a new car that you couldn’t afford with a cash payment

Cons:

  • It’s more expensive than other finance options to buy the car outright
  • Additional charges are made if the mileage agreement is exceeded
  • You don’t own the car during the loan

Ideal for people:

  • Who want to drive a new model
  • Who frequently want to change the car they drive
  • Who don’t want the responsibility of owning a car outright

Eligibility

PCP is slightly stricter in terms of its acceptance rate. Normally, a fair credit score is required.

At My Car Credit, you can make an application on our website to determine your chances of being accepted for a Personal Contract Purchase and because we only carry out a ‘soft search’, there will be no trace left on your credit file.

If you need any help or advice about which finance option is best for you, whether it’s a Hire Purchase agreement, Personal Contract Purchase agreement or a Personal Loan, our team of Car Credit Specialists can advise you. Just give us a call!

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

I want to buy a car on finance, how much can I borrow?

Couple calculating if they can buy a car on finance

After a house, buying a car is one of the biggest purchases you’ll ever make. When you come to apply for car finance, one of the first questions you’ll be asked is how much you are looking to borrow. Whilst this might seem like a simple question, there are actually many things that influence the total amount available to you.

Financial factors

Finance lenders will look at your application and consider various financial factors to determine how much they are willing to lend you. Things such as your credit profile – including your credit score and financial history (i.e. how you have dealt with previous loans and funds) – will all come into play. They will also consider your income, as well as the deposit you have available at the start of the process (although a deposit is not mandatory) to assess whether you can afford the repayments. Essentially, lenders are looking for reassurance from your information that you will be able to afford the finance you are applying for.

If you are sure that all these factors are in order, you are ready to begin your application. One of the best ways to start this process is to figure out your budget.

Budgeting

When working out how much you can afford to spend on your monthly car loan payments, you will need to be realistic. Ensuring that the payments will not overstretch you is vital to your future financial security. You’ll need to bear in mind the running costs of the car, including the rate of miles to the gallon (MPG), insurance rates, and general upkeeping, such as MOT and service costs. The Money Advice Service provides a useful budget planner on their website, which will help you to understand these incomings and outgoings.

When applying for car finance it is crucial that you can meet the monthly repayments comfortably and on time. Depending on your credit history, you may have to prove that you can do this. This can be done by showing three to six months’ worth of bank statements and/or payslips.

One way to make payments more affordable is to opt for a longer payment term. This does mean that you will pay more interest on the overall amount, but it will make the loan more manageable on a month-to-month basis. Bear in mind that the payment term can be affected by your credit profile, and will also be subject to the lender’s criteria.

Know what car you want

It’s important that you are realistic with the car you are looking to finance. You may have a dream car in mind but the finance cost – including running costs – may not be feasible on your budget. You must avoid committing to more than you can afford – missing payments can cause problems in the future, such as your ability to obtain finance of any sort moving forward. This is especially true if you do not have savings or your income reduces.

Also, if you try to apply for finance on a car that is outside of your budget, you are more likely to be turned down for car finance, which can impact your credit profile.

To help you in this area, Money Advice Service has a Car Costs Calculator, driven by CAP data, that will help you work out the yearly running costs on the car you have in mind.

Once you’ve found the car you want, the amount you can borrow will be determined by the value of the car. Some lenders will finance 100% of the value whereas other will lend for more than the value of the car, allowing you to purchase things like insurance, extras, and add-ons.

At My Car Credit, we’re lucky to have an extensive and diverse panel of lenders who offer a variety of finance options, including loaning up to 120% and catering for credit profiles that range from excellent to poor. We are also committed to helping people across a variety of situations, including retired people, young people, self-employed people, and so on.

Do the calculations

If you think you’re ready to begin the initial stages of your car finance application, our Car Finance Calculator will provide a monthly repayment figure, an APR, total cost of credit and total amount payable. Whilst your Car Credit Specialist will tailor a car loan deal for your circumstances, the Car Finance Calculator is great for getting a good indication of what you will be able to borrow.

Ready for the first stage of your car finance journey? Access our online Car Finance Calculator here.

My Car Credit will look at your personal circumstances and make sure that the finance agreement offered to you is one that you can afford. Your interests are always at the heart of what we do. If you need any more help or advice about how much you can borrow, our Car Credit Specialists can advise you. Just get in touch or visit our Help and Advice pages

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

HP, Conditional, PCP: The Lowdown on Car Finance Options

Customer calculates car finance monthly payments

With so many car finance options, choosing the best one can seem both daunting and overwhelming. My Car Credit takes the mystery out of it all by helping you understand how each car finance option works, how much it will really cost you and which option best suits your finances.

Car Finance in a Nutshell

  • Car finance allows you to become the owner of a car where you are unable to pay for your car upfront.
  • You make affordable monthly payments directly to the agreed lender of your car finance.
  • You will become the owner of the vehicle once you have paid the agreed amount in full.

Hire Purchase (HP)

Hire Purchase is the most common type of car finance and very simply means that you make monthly repayments and usually a small admin or purchase fee at the end.

Your car loan is secured against the car, which is owned by the lender. Whilst you are paying, you effectively hire the car from the lender and once all payments have been made the vehicle becomes yours.

Great for those people:

  • Who don’t want to or can’t pay cash
  • Who’s budget and circumstances suit fixed monthly repayments
  • Who have had problems getting credit
  • Who want to own the car at the end
  • Who’s disposable income might change (e.g. starting a family)

Personal Contract Purchase (PCP)

Personal Contract Purchase is similar to Hire Purchase except that you have the option to buy the vehicle at the end of the loan or hand it back.

If you decide to buy, you pay a balloon payment for the balance on the value of the vehicle. The value is fixed at the start of the agreement – the Guaranteed Future Value – so that you know and can budget for the balloon payment before you commit.

Great for those people:

  • Who want lower monthly repayments
  • Who want flexibility and options at the end of the agreement
  • Who like to change their car regularly
  • Who are confident that they can predict their mileage

Conditional Sale

Conditional sale is similar to Hire Purchase except that you don’t have to pay a fee at the end of the agreement, just monthly repayments.

Whilst you’re repaying the agreed amount of the car loan, you have possession and use of the vehicle but it continues to belong to the lender until you have made the final repayment, when the vehicle becomes yours.

Great for those people:

  • Who would rather pay a bit more, spread the fixed repayments and avoid a large payment at the end
  • Who want a choice of length of payment terms
My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Car Finance: A Complete Guide

Man drives car that he purchased using car finance

Buying a car is one of the biggest purchases you’re ever likely to make. Buying a car on finance (or credit) is a great option for those looking to spread the cost out over a period of months and/or years. Terms like personal contract purchase and balloon payment can make car finance seem confusing. My Car Credit is here to break it down for you so you can get the car you want, on a car finance agreement that works for you.

What is car finance?

Car finance is an agreement which allows you to pay for your car in affordable set amounts – rather than paying for the car in one go.

A finance lender pays for the car you want, and you pay them back in monthly instalments. The monthly instalments that you make will depend on how much you want to borrow, the length of the agreement, whether you put down a deposit, your credit score and the type of the agreement.

There are many different types of car finance agreement available, so it’s important to know which one will suit you and your circumstances.

What is Hire Purchase (HP)?

Hire Purchase is one of the most common types of car finance because it is nice and simple – you make monthly repayments to the lender over a set period of time and at the end, you own the car.

Here’s a step-by-step guide:

  • Whilst not obligatory, you have the option of putting down a deposit of around 5 – 10% of the car’s price.
  • The agreement lasts between 24 and 60 months.
  • During this time, you make monthly repayments to the lender and are effectively hiring the car from them.
  • At the end of the agreement, you own the car.

Pros:

  • Good for people who want to buy a car but have flexible disposable income and less than perfect credit score.
  • The repayments are regular and fixed which means you can budget accurately.

Cons:

  • The monthly repayments are normally higher with an HP agreement when compared to other options.
  • The finance lender owns the car until you make your last payment, so you cannot change the car to your own preferences.

What is Personal Contract Purchase (PCP)?

Personal Contract Purchase is a little bit more complicated than other options. You make monthly repayments based on the Guaranteed Future Value (GFV) of the car, which is the amount that the car is estimated to be worth by the end of the agreement. At the end of your agreement, you must pay a final sum (known as a balloon payment) to settle it.

Here’s a step-by-step guide:

  • The car you want is worth £9,000 at the start of your agreement but it will be worth £5,000 at the end of it – this is the Guaranteed Future Value.
  • You make repayments based on the difference between the larger and smaller car values (in this case £4,000) and a mileage limit that you agree with your finance lender.
  • At the end of your agreement (which usually lasts from 2 to 4 years) you pay a balloon payment – the end value of the car (i.e. £5,000).
  • You can settle your balloon payment by giving the car back, putting the money towards another agreement, or paying the amount and owning the car.

Pros:

  • Great for those that want to regularly change the car they drive or like to drive newer models.It has lower repayment fees than other car finance options.
  • Flexibility of options at the end of your agreement.

Cons:

  • It is more expensive to buy the car at the end of your agreement.
  • There is the complication of the balloon payment to settle, for which you’ll need to budget.
  • If you go over your agreed mileage, the financial penalties can be significant.

What is a Guarantor Loan?

A Guarantor Loan is when a third party guarantees to make the repayments on a car finance deal if you are unable to do so. Whilst you have a guarantor in place, you are still expected to be financially responsible for making the agreed repayments.

Pros:

  • Enables those with a less than perfect credit score or those who haven’t yet had time to build a score, to get a car.
  • If you keep on top of your repayments, (which in theory should always be the case) you will be able to improve your credit score as you go.
  • Fixed monthly repayments over a fixed period allows you to budget for this kind of agreement.

Cons:

  • Usually a higher interest rate (APR) than other finance options.
  • The guarantor must fit the lender’s criteria, which normally includes them being a homeowner.
  • If you fail to make the repayments, your guarantor will become liable. If your guarantor fails to make the repayments, you could both be issued with a County Court Judgement (CCJ), which would damage both your credit profiles – affecting both your abilities to obtain credit in the future.

Car Finance with My Car Credit

Buying your own car is one of the biggest (and most exciting) purchases you’ll ever make. If you think you’re ready to start the application process, we’ll be more than happy to help.

We welcome people with credit scores of all levels to apply for finance with us. We operate a soft search policy, which means that your initial application won’t affect your credit score. This allows you to shop around for the best deal for your circumstances, without impacting your credit file.

With over 30 car finance lenders and more than 4500 tried and tested car dealers, we have one of the best networks in the UK to match you with the perfect car. Get started today with our Car Finance Calculator!

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Representative APR and exact APR in car finance (a quick and simple guide)

Man using phone to check for car finance without credit check

If you want to apply for car finance but suspect you may have a poor credit profile, or no credit history at all, you may be wondering “Can I get car finance without a credit check?”. The reality is that all regulated lenders perform credit and affordability checks as part of their commitment to responsible lending. However, this shouldn’t put you off applying. There are plenty of finance options for those with less than perfect credit files. It is also possible to check your car finance eligibility using soft search.

Why do lenders do a credit check?

Lenders do credit checks to understand your financial behaviour and assess your history of handling your finances. They will be assessing your ‘creditworthiness’, or your suitability to receive financial credit. This is often based on how reliable you have been at paying back money in the past.

Lenders have an obligation to lend money responsibly. It can be frustrating knowing that your finances and credit profile will be scrutinized but this ensures that you are not lent more money than you can afford (called ‘affordability’), and that the finance product you are sold is suitable for your circumstances.

Whilst there are some payday lenders who will offer finance without a credit check, you will be charged enormous rates of interest to accommodate the increased risk of lending. This can be unaffordable for larger loans, such as buying a car.

By having a credit check done, this ensures you are offered the correct rate of interest for your circumstances, rather than over-paying.

Soft search versus hard search

When shopping around for car finance, customers can be concerned about damaging their credit profile through multiple hard searches.

To avoid this happening, and to make it easier for you to shop around, when you first apply for car finance with My Car Credit, we only do a soft search credit check. This allows us to do preliminary background checks to establish your eligibility for car finance.

The important thing about soft search is that it doesn’t show on your credit file. This means that they don’t impact on your credit score, and they don’t affect your future chance of securing credit. You can have as many soft searches as you like, and only you can see them on your report.

A hard search happens when you have confirmed that you are eligible for car finance, and are happy to proceed with your application.

A hard credit check will show on your credit file. It is worth bearing in mind that too many hard credit checks over a short period of time can affect your future ability to secure finance. This is because they tell lenders that you have applied for credit, and therefore may be a higher risk.

The great thing about using soft search first is that you can establish your eligibility for car finance before you move ahead with a full search. When you then go on to secure car finance, so long as you keep up your repayments, you may actually improve your credit rating. You can even repair your credit file if it is damaged!

What’s involved in a credit check?

When you apply for credit or a loan, the lender will perform a credit check (sometimes called a credit search) so that they can look at the financial information held on your credit report.

Your credit report will show information such as:

  • Your name and date of birth.
  • Your current and previous addresses.
  • Whether you are on the electoral register.
  • Your credit accounts, including bank and credit card accounts, outstanding loan agreements or utility company debts. Late or default payments will show, and stay on your credit report for at least six years.
  • Financial associations. These are people you are financially linked with through joint credit.
  • Public record information. This covers
  • County Court Judgments (CCJs), bankruptcies and individual voluntary arrangements (IVAs). These stay on your report for at least six years.
  • Banks and building societies. Only your overdraft is shown, not your balances or savings.
  • Any convictions of fraud, or if someone has stolen your identity and committed fraud.

Details such as salary, religion, or criminal convictions (other than fraud) are not included.

How can I check my credit profile?

You may want to check your credit profile before you start applying for car finance. Checking your credit profile doesn’t leave a mark on your file and it can help you understand what lenders will see.

It is also a great opportunity to improve your credit score by ensuring that all information held on you is correct and up-to-date. For example, ensuring that out-of-date financial associations don’t have a negative impact on your credit file.

Your credit score is an indication of the health of your credit file, and is usually scored out of 1000. The higher the score, the better your credit profile.

There are three main credit reference agencies in the UK – Equifax, Experian, and Transunion (formally Call Credit). They hold financial information on you, and are governed by the Information Commissioner’s Office or ICO.

Websites like Credit Angel allow you to access your credit report for free for the first 30 days (there is a fee of £19.99 after this, and you can cancel at any time).

What are my options if my credit score is poor?

My Car Credit has over 30 lenders on its panel and so the chances of getting you an acceptance are increased (although cannot be guaranteed!).

We have lenders that specialise in car loans for customers with damaged or poor credit. You will usually have to pay a higher interest rate, as you represent an increased risk for the lender. You can pay off your loan faster if you wish, and this can help to repair your credit file.

It can also help if you put down as large a deposit as you can afford, and keep the repayment term shorter. However, it’s important not to overstretch yourself on your monthly payments.

There is also the option of a Guarantor Loan. This is a loan where a third party that you trust (usually a family member or close friend) guarantees to make the repayments on a car loan if you fail to. You do remain responsible for the finance agreement.

Please be aware that if you fail to make the repayments, your guarantor will become liable. If your guarantor fails to make the payments, you could both be issued with CCJs, which would affect both your abilities to obtain credit in the future.

Whilst Guarantor Loans are a great way for someone with impaired credit to get car finance, they should not be taken lightly as they come with great responsibility. You can read more about Guarantor Loans here.

So, hopefully, we’ve shown you that credit checks are nothing to be worried about. It is more than possible to check your eligibility for car finance before you have a hard credit check, and credit checks ensure that lenders lend you the right amount, at the right interest rate for your circumstances. We hope this helps you feel more confident about applying for car finance to buy that car of your dreams!

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Smart Tips for Financing Your Next Car

Woman wearing sunglasses thinking about financing next car

The world of car finance can be confusing. This often leads people to make simple mistakes which can cost them lots of money. Don't worry – we're here to give you a few smart tips to making financing your next car a doddle.

Understand your credit score

This is the first thing you need to do before you get car finance. Unlike other loan deals (e.g. mortgages, credit cards) you’re more likely (but not guaranteed!) to get a car loan regardless of your credit score. This is because the lender knows they can always redeem their investment by taking the car. However, this means that you may be willing to accept the first offer a car lender gives you. Normally, car finance will advertise their best interest rate but when you read the finer details, this only applies to customers with good credit scores.

A better indication of interest rate is the representative APR. This is the rate that the majority of borrowers will get (at least 51% of customers).

Conducting a credit score check can give you a better idea of what rate to expect. Many car finance websites have free calculators. These allow you to work out your expected interest rate using your credit score.

Keep the term as short as you can afford

Put simply: the shorter, the better. When you look into finance options you may be tempted to take a long-term contract with fantastically small monthly repayments. However, in almost all cases this isn’t a good option. Essentially, the longer the term is on your contract, the more interest you’ll pay overall. So, whilst it might be cheaper in an immediate sense, you’ll end up paying more. We recommend keeping the term as short as you can afford, but without impacting on your quality of life.

Pay for extras upfront

Most car finance deals come with additional costs. These can include registration fees, documentation fees, as well as any other additional extras you want like extended warranties. These are all normal parts of a loan agreement and are nothing to worry about. However, try to pay them in cash. Adding extras onto your loan increases your monthly repayments and you’ll likely have to pay interest on it.

If you’re looking to finance your car the right way, you should start by conducting a soft search with My Car Credit. Our approach is a great way of finding out about your credit score and the car finance options available to you without affecting your credit profile. We’re ready to help you on your journey to a great car with a great finance plan.

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Buy Don’t Lease: The Benefits of Owning a Car

couple sat next to each other enjoying the benefits of owning a car

Having a car is a vital part of modern life. A lot of us drive daily and rely on our vehicles to do almost everything. In recent years, leasing has become a popular way of obtaining a car, but is it any better than buying or financing your next car? What are the benefits of owning a car? Here are our two cents on the debate.

Leasing a car

You can think of leasing like renting – you make monthly payments which give you use of the car until you are ready to give the car back.

Pros

  • You get newer models of a car that you might not be able to buy otherwise.
  • You make smaller repayments than when you buy a car.
  • You can change the car you drive (hassle-free) every few years.
  • You get tax advantages if the car is being driven for business purposes.

Cons

  • There are mileage restrictions that form part of your lease contract if exceeded these will incur an additional fee.
  • You end up paying more than what the car is worth, as you lease it during a period of rapid depreciation.
  • You are committed to completing the whole length of the loan.
  • You must return the vehicle in showroom condition – that means no alterations and no accidental stains or scuffs. Any changes will incur an additional fee.
  • Your car insurance will be higher.

Leasing is a good option for those that aren’t concerned about owning a car but would prefer to drive a new model every few years.

Buying a car

Buying a car is where you purchase a vehicle outright without any agreement or contract in place.

Pros

  • You can make any changes to the model (aesthetic or mechanic) that you see fit.
  • In the long run, it is the cheapest way to buy a car.
  • There are no mileage restrictions.
  • The car is a financial asset and you can sell it at any time.
  • Owning a car gives you the freedom to do what you want with it.

Cons

  • You have less protection than the consumer rights that come with a finance agreement.
  • You must pay a lump sum for the car in one go.
  • Your car loses value as it depreciates, losing around 60% of its value in the first three years.

Put simply, buying a car is a good option for those that can afford it and want the freedoms that come with upfront ownership.

Financing a car

Financing the purchase of your car is a great way of getting ownership of the vehicle without making one lump sum payment.

Pros

  • Financing allows you to spread the cost of a car and make affordable monthly payments throughout your agreement.
  • Making regular monthly repayments on a finance agreement is a great way to improve your credit score and prove your financial responsibility.
  • You have the option of owning your car at the end of your agreement.

Cons

  • The monthly payment can be higher than a lease option.
  • You can end up paying more than what the car is worth if you take on the wrong finance option.
  • Some finance agreements have restrictions on how you can use the vehicle.

There is no right and wrong when it comes to getting a car. We understand that it depends on any number of individual circumstances. Leasing is an affordable option for those that aren’t concerned with owning their vehicle. Buying outright requires the upfront cash but it does give you outright ownership and allows you the most freedom. Financing is a great option for people that want to own their vehicle but don’t want to make one large payment. If you’re looking at potential finance options for your next vehicle, why not get in touch with our team here at My Car Credit – our specialist advisors would love to hear from you.

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 23.9%, annual interest rate (fixed) 23.88%, 47 monthly payments of £234.69 followed by 1 payment of £244.69, total cost of credit is £3,775.12, total amount payable is £11,275.12.

My Car Credit is a credit broker and not a lender.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!