What is a Balloon Payment on a Car Loan?

Cars at a car finance dealership

The car loan industry has its fair share of jargon, and as a prospective buyer, it’s important to understand the lingo. “Balloon payment” is one of the most common terms you’ll encounter when shopping for loans, which is why we’ve dedicated an entire article to it.

Read on to find out more about the definition of a balloon payment on a car loan, what to expect and how to get the best deals on vehicle finance.

What is a balloon payment on a car loan?

The concept of a balloon payment on a car is relatively simple. It’s a final instalment, paid to the lender in a lump sum at the end of your loan. The balloon payment is usually larger than other previous payments and is designed to ensure the lender isn’t out of pocket.

Balloon payment car loans are offered on two types of finance agreements – Personal Contract Purchase (PCP) and Lease Purchase. We take a closer look at each below:

PCP balloon payment

PCP loans are one of the most popular ways for Brits to get behind the wheel of a new car. Most contracts span for three to five years and require monthly payments. At the end of the contract, you’re offered the option of making a final balloon payment to purchase the car outright. Also called an Optional Final Payment, this final instalment gives you full ownership of the car.

How a PCP balloon payment works

  • At the beginning of your loan, the lender calculates the balloon payment based on the Guaranteed Future Value (GFV). This is the predicted resale value of the car at the end of the agreement. The balloon payment is designed to cover the remaining value of the GFV.
  • The GFV doesn’t change over the life of your contract, regardless of whether the value of the car fluctuates.
  • After making your final balloon payment, you take legal ownership of the car.  

Think a PCP loan could be the right solution for you? Fast and easy to use, our car loan approval calculator is a great way to get the ball rolling and find out how far your budget can take you.

Lease Purchase (LP) balloon payment

LP agreements give you the option to pay a percentage of your loan at the end of the contract. This figure is called the balloon payment and unlike PCP loans, it’s not optional. Over the lifetime of the agreement, you’ll need to set aside cash to pay off the balloon payment. Once the balloon payment has been made, you take on full ownership of the vehicle.

How an LP balloon payment works

  • At the start of the contract, you and the lender agree on a set amount to defer. For example, a car may cost £16,000 and you choose to defer £4000.
  • The remaining £12,000 is paid over the next four years, in monthly payments.
  • After making your final monthly instalment, you top up your balance with the balloon payment of £4000. This gives you legal ownership of the vehicle.

The benefits of a balloon payment on a car

Lower monthly repayments

Opting to make a balloon payment at the end of your contract is a great way to unlock lower monthly repayments. You’re essentially deferring a percentage of the total cost until the end of your finance agreement. This brings down your monthly repayments and can make it easier to incorporate a car loan into your budget.

Stretch your budget further

 For many motorists, balloon payments are a great way to stretch the budget further. Instead of settling for a less-than-ideal vehicle, a balloon payment allows you to defer part of the cost and secure the keys to your dream car. With a responsible attitude towards finance, there’s plenty of time to save for your balloon payment.

Do all car loan contracts include a balloon payment?

No, not all contracts include a balloon payment. Options like Hire Purchase (HP) agreements incorporate the total cost into your monthly repayments. This means there’s no need to make a balloon payment at the end of your contract.

Can I refinance a balloon payment car?

We get it. Things come up and despite the best intentions, it’s not always possible to cover your balloon payment at the end of your contract. If you find yourself in this situation, it is possible to refinance a balloon payment car. Agreements usually take on a Hire Purchase model and spread the cost of your balloon payment across several months or years. At the end of the contract, you become the legal owner of the vehicle.

It’s worth noting that before opting to refinance a balloon payment, you should consider the current value of the vehicle compared to the cost you’ll have to absorb to keep it. If the vehicle is worth less than the balloon payment, it’s generally best to return it and purchase a similar second-hand car for less. Similarly, if the car is worth more than the balloon payment, it’s worth refinancing and committing to full ownership.

If you think refinancing your balloon payment could be a good option, the first step is to reach out to your lender. It’s also worth getting in touch with our team to discuss refinance options. Our panel includes plenty of lenders willing to offer balloon payment finance plans designed to help you stay behind the wheel.

Find out more about balloon payments

Want to know more about balloon payment car instalments and the different types of loans available to you? Send us an email or give us a call on 01246 458 810 to chat to an experienced team member. We’re here to help, so don’t hold back when it comes to questions and queries.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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 CS Car Finance?

Cars at a car finance dealership

When you’re shopping around for the right car finance agreement for you, you’ll come across plenty of jargon. As such, it’s easy to feel overwhelmed – but if this sounds like you, don’t panic!

At My Car Credit, we’re dedicated to helping you find the right car finance agreement for your unique needs. That’s why we’ve got a complete guide to car finance to help you secure a suitable deal for your circumstances. 

Below, we’ll break down one specific kind of auto finance – conditional sale – into simple, digestible terms.

Similar to hire purchase (HP) car finance, conditional sale (CS) finance is an ideal agreement for motorists who want to own the car at the end of the term without facing extra conditions. Read on to find out the answer to: What is CS finance?

What is CS finance?

Conditional sale car finance – or CS car finance – is one type of auto finance agreement. 

With CS car finance, you’ll benefit from affordable monthly payments and will own the vehicle in full once all your agreement’s conditions are fulfilled.

CS car finance is very similar to hire purchase (HP) car finance. However, to own the car at the end of an HP agreement, you have to pay a small ‘option to purchase’ fee. With conditional sale finance, provided that you’ve made all the monthly payments, the car is automatically yours at the end of the term – you won’t face a final fee.

How does conditional sale work?

Here’s a step-by-step breakdown of how CS finance works:

  1. Choose your car. Shopping for a new, nearly-new or used car is one of the more fun parts of life. Don’t forget you can use My Car Credit’s one-stop shop of FCA-vetted dealers to find a nearly-new vehicle.
  2. Speak to a lender about a conditional sale finance agreement.
  3. Make your fixed monthly payments. Depending on the type of contract you agree with the lender, these payments typically extend over a period of time ranging from one to five years. A longer term means lower monthly repayments, but more interest overall.
  4. No balloon payment. With CS finance, you’re the guaranteed car owner after you’ve made your final finance payment.

With CS finance, a deposit is optional and often flexible, depending on the lender. However, opting to make a deposit can reduce the amount left to pay per month, and the overall interest you owe.

Remember that your monthly payments will cover the full cost of the vehicle plus interest.

Who is CS finance best suited for?

CS car finance is particularly suitable for drivers who:

  • Want full ownership of the vehicle at the end of an agreement’s term.
  • Don’t want final balloon payments or mileage restrictions whilst using the car.
  • Value predictable budgeting – like My Car Credit’s other car finance agreements, CS finance breaks the cost of the vehicle into affordable monthly instalments, making budgeting easier.

CS car finance may also be a good fit for non-prime credit customers (subject to lender approval).

Pros and cons of CS finance

Pros

Cons

You own the car automatically

Monthly payments may be higher than PCP car finance

No balloon payment

Less flexible at the end of the term than PCP

Fixed payments help with budgeting

Ownership comes with maintenance costs

No mileage or condition charges

If you plan to switch your vehicle at the end of the term, CS may not be ideal

 

Is conditional sale right for you?

There are a few easy questions you can ask yourself to establish whether CS finance is right for you:

  • Do you want to own your car at the end of the term? 
  • Do you prefer simple budgeting?
  • Do you want to avoid surprise charges?
  • Are you comfortable with standard monthly payments?

If the answer to these questions is ‘yes’, then conditional sale car finance may be right for you.

You can always check the affordability of a conditional sale agreement by using My Car Credit’s car finance calculator.

What is the difference between hire purchase (HP) and conditional sale (CS)?

Conditional sale (CS) car finance is often described as similar to hire purchase (HP) car finance

There are some likenesses between these two car finance agreements, but they also differ in key ways. Being able to distinguish between the two will help you understand which type of agreement might be better for your motoring needs.

Ownership timing

With HP finance, you’ll usually need to pay an ‘option to purchase’ fee at the end of your agreement in order to fully own the car. 

Alternatively, you’re automatically the vehicle’s owner after you’ve made the final monthly payment of a CS agreement. In other words, unlike with HP, you won’t face an additional fee.

Agreement structure

With both HP and CS agreements, you’ll be paying for the full cost of the vehicle over time, plus any interest, via affordable monthly instalments.

Deposit & term

The deposit and term of both CS and HP car finance are very similar. You’ll benefit from an optional deposit and flexible repayment term with both.

End-of-term simplicity

If you prefer simplicity at the end of your car finance agreement, CS is likely best for you compared to HP. 

With CS, there’s no need to make a final decision or payment to secure vehicle ownership.

Who it’s best for

If you know that you want to own the car outright at the end of your car finance agreement and avoid any mileage restrictions and end-of-agreement admin, CS car finance might be right for you.

HP car finance is also suitable for drivers looking to own their vehicle but want to delay a guaranteed commitment to do so until the final payment.

Apply for conditional sale car finance with My Car Credit

Now that you know the answer to ‘what is CS finance’, you can decide if it’s the right choice for your car financing needs. At My Car Credit, our goal has always been to make securing online car finance as simple and accessible as possible. As part of the UK’s largest motor finance broker, we combine award-winning technology with a broad lender panel to improve your chances of being accepted for the right car finance agreement for your needs.

Our initial credit check is only a soft search. As such, it won’t leave a mark on your credit report, but will give us a sense of your circumstances and borrower profile.

Use our online application form to kickstart your conditional sale car finance journey with My Car Credit today. A simplified application process will give you a no-obligation quote in mere minutes, putting you in the driver’s seat as speedily as possible.

Frequently asked questions

Do I need a deposit for CS car finance?

Any deposit for CS car finance is optional, depending on lender flexibility. That said, if you do pay an initial deposit, this can reduce both your monthly repayments and any interest you owe on a CS car finance agreement.

Is CS better than HP?

If you’re looking for simplicity at the end of your finance agreement and know that you want to own the vehicle in full, CS car finance might be a more suitable agreement compared to HP.

What’s the difference between CS and leasing?

With a leasing agreement – also known as personal contract hire (PCH) car finance – you’re essentially renting the vehicle for a set period of time. At the end of the term, you’ll hand the car back. Alternatively, with CS car finance, you’re guaranteed to own the vehicle at the end of the agreement.

What happens if I want to end my CS early?

Cancelling a car finance agreement early is known as voluntary termination. It is possible to secure voluntary termination on CS car finance, but you’ll need to notify the lender in writing and have paid at least half of the total amount payable under the agreement.

Can I get CS finance with bad credit?

My Car Credit offers CS finance even to drivers with poor credit by looking at each case individually and without judgement. Be aware that poor credit history can result in higher monthly payments and interest rates.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

Can I Get Car Finance with a Provisional Licence?

Female learner driver

Car finance is a popular option for all kinds of drivers, not least those getting their first car. But what about buyers who haven’t actually passed their test? There are lots of people out there who want to buy a car ready for the moment they pass or even learn and take their test in a new set of wheels.

In this post, we’ll explain whether you can get car finance with a provisional licence and the limitations in doing so.

Car finance with a provisional licence

The good news for the people mentioned above is that you can get car finance with a provisional licence. The main requirement is that you’re legally able to drive the car you’re buying.

With a provisional licence, that simply means you need someone with you who is over 21 years old and has held their own full licence for three or more years. Or a qualified driving instructor, of course. It’s also worth noting that you’ll need to be at least 17 years old, even though you can apply for a provisional licence once you reach 15 years and 9 months.

Because you haven’t passed your test (and there’s no guarantee you will), lenders may put some limitations on the kind of car they will help you finance – and how much you can borrow. An upper limit of around £25,000 can be expected, although this depends on affordability.

If you want to increase your chances of success or get more freedom when it comes to your car finance options with a provisional licence, consider the following:

  • Joint application – You can apply for joint car finance with someone living at the same address.
  • Guarantor – Getting someone to guarantee your loan will give lenders the reassurance they need.

Talk to our car finance experts

My Car Credit aims to make it easier to get the car you want and need, whatever your circumstances. Check your car finance eligibility online today to get started, and don’t hesitate to contact our team on enquiries@mycarcredit.co.uk if you have any questions.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

How to Find Car Finance for Young Drivers

Young woman with glasses

Getting your first car is a big deal. It’s freedom, independence and the ability to do what you want, when you want. Whether it’s driving to a part-time job, road-tripping to Alton Towers with your mates or just avoiding the endless faff of unreliable buses, having a car gives you flexibility and freedom.

But here’s the sticking point – cars are expensive. And most young motorists don’t have the money to buy one outright. That’s where car finance for young drivers comes in, allowing you to spread the cost over time and get on the road sooner.

That said, car finance can feel like a maze. Between credit checks, finance types, deposits and jargon, it’s easy to feel like the whole thing isn’t made with young drivers in mind.

We’re here to fix that. This guide will cover everything you need to know about cars on finance for young drivers in the UK. Yep, even with little credit history or part-time income. We’ll break down what lenders actually look for, how to choose the right car and finance type, and what steps will help you get approved. 

Can young drivers get car finance in the UK?

Yes! More young people are doing it every year. In fact, getting a car on finance for young drivers has become one of the most popular ways for under 25s to secure a first or second vehicle.

But there are a few things that make it trickier when you’re just starting out. Here’s what you need to know:

  • You must be 18 or older to apply for car finance in the UK.
  • If you have little or no credit history, lenders can’t easily judge how responsible you are with money.
  • Many young drivers are in part-time or gig work, which can make income harder to verify.
  • Lenders see new drivers as higher risk, since younger people are more likely to make insurance claims or miss repayments.

That doesn’t mean you’ll be turned down automatically. It just means lenders will look at your whole financial picture, not just your age. Plus, there are steps you can take to make yourself a stronger applicant and score the best car finance for young drivers.

What lenders look for in young driver applications

Lenders aren’t expecting you to have a glowing credit report and a £40k salary at 19. But they do want reassurance that you’re a safe bet. Here’s what they’ll be checking:

Age

You need to be 18 to legally enter into a credit agreement. Some lenders prefer applicants aged 21+, but many now offer flexible options for 18-20-year-olds, especially with a guarantor.

Employment and income

Most lenders want to see some kind of regular income, even if it’s from part-time work or self-employment. You don’t need a full-time office job (even shifts at Costa or Deliveroo earnings can help) but the more predictable your income is, the better.

Credit score

A good credit score shows you can manage money responsibly. But if you don’t have a score at all yet, don’t panic. Many young applicants are in the same boat. Lenders may just ask for a bit more info or suggest a guarantor.

Affordability

Lenders calculate whether the monthly repayments, plus your insurance and living costs, are realistic. Applying for a £15k car with a £400/month repayment when you earn £900/month won’t fly. £150/month for a £5k car? Much more doable.

The best types of car finance for young drivers

There’s no one-size-fits-all answer. The reality is that some plans suit young drivers better than others. Here’s a rundown of your options for car finance for young drivers:  

Hire purchase (HP)

HP is one of the most popular finance options for new drivers, because it’s simple and stable.

  • Pay a fixed amount each month
  • No mileage restrictions
  • You own the car at the end of the term

It’s easy to understand, budget-friendly and often more accessible for those with limited credit.

Example: You’re 19, working part-time and want to buy a £6,000 car. With HP, you might pay around £140/month over four years, and it’s yours once you’ve made the final payment.

Personal contract purchase (PCP)

PCP lets you lease the car for a fixed term with the option to:

  • Return it at the end
  • Pay a balloon payment to buy it
  • Trade it in for a new model

Monthly payments are lower than HP, but you won’t automatically own the car unless you make the final payment. PCP is great if you like the idea of upgrading every few years or want lower payments short-term. Just keep an eye on mileage limits and wear-and-tear terms.

Example: You finance a nearly-new Ford Fiesta for three years. You only pay for the depreciation, not the full cost, which keeps your payments low.

Personal loan

You can also take out a personal loan from your bank or another lender to buy the car outright.

  • You own the car from day one
  • Use the money wherever you like (including private sales)
  • Great for those with strong credit or parental co-signers

It’s not always ideal for first-timers, but if your credit’s decent or you have a guarantor, it can offer more flexibility.

Guarantor finance

This is when a parent or family member agrees to cover the loan if you can’t.

  • Can open up better deals and lower rates
  • Lenders see it as less risky
  • Everyone involved needs to understand the legal responsibility

Guarantor finance is a useful option for students or young people without a credit record. Just make sure both parties are 100% clear on the terms. 

Family support: help from the Bank of Mum and Dad

Let’s be real, getting on the road isn’t cheap. From buying the car itself to sorting insurance and ongoing running costs, it’s no surprise that many young drivers turn to family for help.

Research from the AA found that over a third of young drivers (26%) received some form of financial help toward purchasing a car, whether that was with the deposit, monthly finance payments or insurance costs. The top reasons? A reward for passing the driving test, a birthday gift, starting university or celebrating exam results. 

It’s nice to have help. But of course, lots of young drivers don’t benefit from that level of support. Around 66% of young motorists haven’t received any financial help from family. If you’re in that majority, don’t panic. You’re certainly not alone and there are still affordable ways to get behind the wheel, especially when you work with a broker like My Car Credit.

How to boost your chances of getting approved

There are lots of practical steps you can take to improve your odds, even with limited credit or income.

Use a broker

A broker like My Car Credit has access to dozens of lenders, not just one. This increases your chance of being matched with someone who understands young drivers and offers better rates.

Improve your credit

Start building your credit before you apply. The below steps can work wonders for your score:

  • Register to vote
  • Use a credit builder card and pay it off in full each month
  • Avoid missed payments on bills or subscriptions

Every little bit helps, especially over 6-12 months.

Get a guarantor

A parent or guardian can act as your financial safety net, which reassures lenders. It’s not always needed but it helps if you’re still living at home or just starting work.

Apply for what you can afford

Lenders love realism. Start with a modest, reliable car to show you’ve got your head screwed on. You can always upgrade later once your credit and income grow.

Pick the right car

Small, fuel-efficient, and low-insurance group cars are a good bet. Think:

  • Ford Fiesta
  • Renault Clio
  • Honda Jazz
  • Volkswagen Polo
  • Mini Cooper
  • Kia Picanto 

Avoid anything flashy, thirsty or expensive to fix. It’ll only bump up your repayments and insurance. Not to mention bring down your chances of approval. 

Choosing the right car for your finance application

The car you choose has a huge impact on your application. Here’s what matters:

Car value

Lower value = lower repayments = easier approval. Basically, lenders are more likely to offer car finance for young drivers if the value is modest. 

Insurance groups

Choosing a car in a low insurance group (models like the VW Up, Hyundai i10 and Toyota Aygo) can be a great way to win over lenders and boost your chances of approval. Looking for car finance for young drivers with insurance rates you’ll love? Check out our roundup of the 10 Cheapest Cars to Insure for Young Drivers

Consider used

Used or nearly new cars don’t just cost less. They hold their value better and can be just as reliable as showroom vehicles. Avoid write-offs or private sales. Lenders prefer trusted dealers like the ones you’ll find in My Car Search

Insurance and finance: why they go hand-in-hand

It’s easy to think of car insurance and car finance as separate things. Not true! They’re linked and lenders know it.

When reviewing your application, lenders consider:

  • Insurance costs as part of your monthly expenses
  • Your ability to afford both the loan and the insurance
  • How likely you are to make repayments long-term

Consider black box insurance

Looking for ways to save on car finance for young drivers with insurance? A black box (or telematics) policy tracks your driving and rewards you for being careful. It can lower your premium significantly and show lenders you’re a low-risk driver.

  • Ideal for under-25s
  • Proves you’re responsible
  • May positively influence lender decisions

Tips to improve your credit score as a young driver

Your credit score is like your financial reputation. The better it looks, the better your finance options. 

Here’s how to start building it, even as a student or first-time earner:

  • Get on the electoral roll – This proves your identity and address – a quick win if you want to boost your score.

 

  • Use a credit-builder card – Spend a little each month (like your Spotify or Netflix bill) and pay it off in full.

 

  • Avoid missed payments – Set up direct debits for your phone, utilities and subscriptions.

 

  • Keep credit utilisation low – If you have a £500 limit, try not to use more than £150-£200 at any one time.

 

  • Check your credit file regularly – Use tools like Experian, ClearScore or Credit Karma to spot errors or see progress.

Remember, building credit takes time. But starting now pays off when you’re ready to upgrade or apply for a mortgage down the line.

Don’t forget: young driver incentives

Some lenders, car brands and dealerships offer special deals on car finance for young drivers. These can include:

  • Cashback offers
  • Deposit contributions
  • Discounted servicing packages
  • Free insurance for a year
  • Student-specific deals (especially through unis)

Always ask what offers are available. You might be surprised by what’s out there! Every little saving helps when you’re just getting started.

Why use My Car Credit to find young driver car finance?

At My Car Credit, we’re here to make your first (or second) car finance experience smooth, safe and totally stress-free.

Here’s what makes us different:

  • Wide lending panel – We work with the UK’s biggest panel of lenders, including high-street banks and alternative options. More variety means more options for young drivers.  
  • Our soft credit check means zero impact on your score.
  • Quick, online application – No paperwork piles or long phone calls when you’re trying to cram for a uni exam. 
  • Expert support from real people who know how to finance cars for young drivers. We know our stuff and can also help with tips on car finance for young drivers with insurance. 
  • Transparent terms – What you see is what you get with My Car Credit. No sneaky fees or jargon. Just the best car finance for young drivers. 

It’s everything you need, minus the headache. Whether you’re a student in Sheffield, a new apprentice in Reading or have just scored a post-grad job in London, we’ve got your back.

Ready to get started? Use our car finance calculator to see what you could afford or apply online now.

FAQs

Can I get car finance at 18?

Yes! 18 is the legal minimum to get a car on finance for young drivers in the UK. Your options may be limited without income or a credit score, but a guarantor can help.

What’s the best car finance option for young drivers?

Looking for the best car finance for young drivers? Hire purchase is the most straightforward. PCP is good for flexibility and lower payments. Guarantor finance works well if you’re just starting out.

Can a student get car finance in the UK?

Yes, especially with a part-time job or a guarantor. Many lenders are happy to work with students as long as repayments are affordable.

Do young drivers need a guarantor?

Not always, but it helps if you’re under 21, don’t have credit history or aren’t earning much yet.

What credit score do I need for car finance?

There’s no fixed score, but the higher your score, the more options and lower rates you’ll get. You can still get finance with fair or limited credit.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

How to Finance a Car in 4 Easy Steps

Woman at cafe using her phone

Car finance is growing in popularity in the UK. In fact, the Finance & Leasing Association (FLA) recently announced that consumer car finance has increased by 39% from February 2021 to February 2022.

Why? Car finance is an affordable, accessible way of purchasing a new or nearly new vehicle. There are various kinds of car finance available, depending on the circumstances of the buyer, and many lenders will now work to provide car finance to those with a poor credit rating.

If you’re new to the car finance world, you may be wondering how to actually finance a car. This article is here to help you gauge what to look for when considering car finance, helping you to stay in the driving seat.

How to finance a car: 4 steps

Establish your priorities

There’s no ‘one size fits all’ approach – different kinds of car finance will suit different people differently! One of the best ways to work out which type of car finance would suit you is by asking yourself key questions.

Are you looking for a new or nearly-new vehicle? Would you prefer to own your car at the end of your car finance deal, or will you plan to sell it? What kind of credit score are you working with? Can you work with mileage and other usage caps?

Once you’ve got an idea of the answers, you’ll be better able to tailor your car finance search.

Ask yourself what you can afford

Remember, car finance can be made up of different kinds of payment, depending on which finance option you opt for (more on that later). You need to ascertain what you’re able to afford, so that you can choose a deal that suits you.

You may prefer higher monthly repayments and a shorter term or lower deposit, or favour things the other way around. If you want to purchase the car at the end of the finance term, you’ll need to factor in this one-off payment. Remember, if you opt for a finance term with mileage or other limits, you may face penalties if you exceed these.

Your credit score will play a significant role in the kind of car finance you can secure. Higher credit scores tend to result in lower interest rates and better deals, but plenty of car finance providers can still work with you if you have a poor credit score – just be sure to determine who these are from the beginnings of your search.

Decide which car finance is for you

There are different kinds of car finance – your perfect deal depends on your needs. The most common are car loans, personal contract purchase, hire purchase, and personal contract hire. All of them involve making affordable monthly repayments over a pre-determined period of time, alongside interest.

We’ve written plenty about the pros and cons of these different kinds of car finance elsewhere – just browse the hundreds of helpful blogs and articles that we’ve compiled – but a quick summary goes as follows:

  • Car loans are like a personal loan, making them more expensive and better for those with good credit scores, but you will own the car from the get-go.
  • Personal contract purchase is a flexible option and you can opt to purchase the car at the end of the finance term.
  • At the end of hire purchase, you’ll automatically own the car and you’re paying less interest, but your monthly repayments are higher.
  • Personal contract hire is essentially a long-term rental with mileage caps but lower monthly repayments.

Reach out to car finance providers

Now that you know what kind of car finance terms you’re looking for, you can reach out to car finance providers, many of whom will have an online application process to determine whether you’re suitable for car finance.

At My Car Credit, we make things easier by comparing deals across our large network of trusted lenders. You’ll get a no-obligation quote within minutes with simple, straightforward online applications. You just tell us about yourself and your priorities, and we’ll use our unique technology and stellar network with the best lenders to find the right car finance deal for your circumstances.

Car finance made easy

Don’t panic if you still have questions about how to finance a car – My Car Credit’s friendly team of specialist advisors are available to answer any questions that you may have.

We aim to take the stress out of the search, so get in touch today on 01246 458 810 or email enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

Should I Lease or Finance a Car?

Car reflected in window

Choosing between leasing or financing a car will depend on your needs and circumstances. In both instances, you’ll be able to use a vehicle as you pay a series of pre-determined monthly instalments – but the main difference between leasing and financing a car is whether or not you end up the vehicle’s owner.

As such, there’s no right or wrong answer to the question of whether you should lease or finance a car – it’s all about your priorities. Read on to find out more.

Car leasing and car financing – what’s the difference?

Leasing and financing a car may sound similar, but they do have key differences.

The main difference between leasing and financing a car is ownership. When you lease a vehicle, you’re essentially borrowing the vehicle from a dealer for a specified period of time – usually anywhere from 12 months up to 60 months. You’ll pay a monthly fixed amount which usually includes service and maintenance fees. At the end of the lease’s term, you hand the car back – you’re never its owner.

With car financing, however, you have the option of owning the car at the end of your finance term. Much like leasing, you’re making a series of fixed monthly repayments over a pre-agreed time period, after which time you have the option of making a final payment, making you the car’s legal owner.

Buying a car outright is the other option when buying a car – but you need savings or a personal loan in order to finance this.

Should you lease or finance a car?

As with anything, whether or not leasing or financing a car is most appropriate for you will depend on your priorities and preferences.

Leasing a car – the advantages

  • When you lease a car, your monthly repayment amount will typically cover service and maintenance costs.
  • As you are never the vehicle’s owner, you don’t have to worry about the car depreciating in value over time.
  • If you like to change your car frequently, leasing is a far more appealing option.
  • Because you won’t own the vehicle, you also don’t have to worry about reselling it at the end of the lease term.
  • If you use your car for business purposes, you may benefit from greater tax write-offs with a lease (unless it’s a luxury vehicle).

Leasing a car – the disadvantages

  • There’s usually a mileage limit for leased cars, and you do have to pay a penalty if you exceed this, so if you’re a driver of long distances, leasing may not be for you.
  • Although service and maintenance costs are covered, if you cause any serious damage to the vehicle, you may incur further charges.
  • You don’t ever own the vehicle.
  • You may also incur charges if you want to end the lease deal early.

Financing a car – the advantages

  • Car financing tends to be more flexible than leasing a car. Similar to leasing, you can use the length of the agreement, and you may be able to decide on an annual mileage limit and deposit amount.
  • Car finance is typically available on both new and used cars, whereas leasing is only available for the newest vehicles.
  • If you’re after the lowest possible monthly repayments, car finance on a used car is the best option.
  • At the end of car finance, you’ll own the car. Depending on which finance you’ve gone for, you may need to make a final payment, after which you are the car’s legal owner.

Financing a car – the disadvantages

  • With PCP finance, you can choose whether or not you want to own the car at the close of your deal. However, as with leasing, if you opt to return the car, but have exceeded the mileage limit or caused excessive damage to the car, you will incur extra charges.
  • You are locked into a repayment schedule, so you need to ensure that your financial circumstances aren’t likely to change whilst you’re repaying your car finance. Missed repayments will affect your credit score – though there are ways of securing car finance even with a poor credit rating.

Talk to us about car financing and leasing

If you still have questions about whether car finance or a car lease is best for you, get in contact with My Car Credit on 01246 458 810 or email enquiries@mycarcredit.co.uk.  

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

Can I Give My Car Back to the Finance Company?

Set of car keys

Buying a car on finance can be a great way to spread the cost of a big purchase and get behind the wheel sooner. But life changes. Maybe your income has dropped, your family’s grown or the car you’re financing simply no longer fits your lifestyle. If you’re wondering: can you return a car on finance, the good news is yes – in many cases, you can. But your rights, costs and the process vary depending on your finance type.

This guide covers everything UK drivers need to know about returning a financed vehicle, from legal protections under the Consumer Credit Act to voluntary termination, surrender and alternatives like settlement or part-exchange.

Whether you’re deep into a PCP agreement or just starting a hire purchase plan, we’ll walk you through your options and help you weigh up the next best move when you want to return a car on finance.

Can you return a car on finance in the UK?

The short answer is yes. The long answer? How and when you can return a car depends on the type of finance you’ve taken out and how far you are into the agreement.

If your car is on a personal contract purchase (PCP) or hire purchase (HP) agreement regulated by the Consumer Credit Act 1974 you may have a legal right to end it early through something called voluntary termination, once you’ve repaid 50% of the total amount owed. 

Before you make a decision it’s important to understand that returning a car isn’t always cost-free, especially if you haven’t hit that 50% threshold yet or your car has excess wear and tear. For other types of finance, like personal contract hire (PCH), your rights are more limited and returning a car may involve hefty fees that will leave you out of pocket. 

Voluntary termination explained

Can you return a car on finance with a PCP or HP contract? Yes. Voluntary termination (VT) is a legal right under Section 99 of the Consumer Credit Act 1974. It allows you to end a PCP or HP agreement early by returning the car, provided you’ve paid at least 50% of the total finance cost, including fees and interest. 

Eligibility

To qualify for voluntary termination:

  • You must be on a regulated PCP or HP agreement.
  • You must have paid (or be willing to pay) 50% of the total amount owed. This includes the car’s price, interest and any fees included in the agreement. 

For PCP, the balloon payment is also counted. If you’ve not yet reached 50%, you may still terminate early by topping up the balance to hit that figure.

How to start the process

1. Get in touch with your finance company in writing (email or post)

Want to know more about whether you can return a car on HP finance? It starts with an email or letter. Let your lender know you’d like to explore returning your car, whether that’s via voluntary termination or another route. It doesn’t need to be War and Peace but putting it in writing gives you a clear record.

2. Ask for your settlement balance and check how much you’ve paid so far

This helps you figure out if you’ve crossed the 50% mark (which matters if you’re aiming for voluntary termination). The finance company will usually send a formal breakdown so you can see exactly where you stand.

3. Book a time to hand the car back (and expect an inspection too)

When can you return a car on finance? Before collecting the car, the lender will likely want to give the vehicle a once-over to check for wear and tear, mileage and overall condition. You might be asked to drop it off somewhere, or they could pick it up. Either way, give it a clean and make sure there’s nothing left in the glovebox!

Pro tip: Keep a paper trail. Save every email, letter and receipt. If you chat over the phone, follow it up with a quick note by email. A “just to confirm” goes a long way if anything’s disputed down the line.

Conditions to be aware of

The car needs to be in decent condition

Fair wear and tear (think worn tyres or a few light scuffs) is okay but expect the lender to raise an eyebrow (and possibly a repair bill) for anything major. For example, dents, deep scratches or a cracked windscreen. If the car’s been well looked after, you should be fine. 

Mileage limits matter (for PCP agreements)

Can you return a car on finance if you’ve gone over the agreed mileage? Yes, but you’ll likely be charged for the extra. It’s usually a few pence per mile but it can add up fast, so double-check your contract and don’t guess.

Missed payments or arrears can muddy the waters

You might still be eligible to return the car if you’ve fallen behind on payments, but the lender may ask for arrears to be cleared first. It’s always better to be upfront. 

Impact on credit score

Voluntary termination isn’t a default or missed payment so if handled properly, it won’t damage your credit score. The fact you used your VT rights may be recorded on your credit file, but it’s not a negative mark.

Voluntary surrender: what it means

If you haven’t yet reached the 50% repayment threshold and can’t afford to top it up, you may still be able to return the car. This is called voluntary surrender and it’s very different from VT.

Key differences from voluntary termination

You give up the car, but you’re still liable for the remaining balance

Unlike voluntary termination, voluntary surrender doesn’t wipe the slate clean. You hand the car back but you’re still responsible for repaying the remaining balance, which could be more than expected.

The finance company usually sells the car at auction

Can you return a car on finance early by selling it yourself? Probably not. The vehicle is typically sold off at auction by the lender, and the sale price is knocked off your remaining finance. If the car sells for less than what you owe (which it often does), you’ll be expected to make up the difference, aka the shortfall.

It’s treated more like repossession than a clean break

Because it’s not a legal right like voluntary termination, voluntary surrender can be recorded on your credit file in a way that doesn’t look great to future lenders. It’s not always flagged as a ‘default’ but it’s still a red flag.

Financial impact

Voluntary surrender can have serious financial consequences. You want to make sure you understand exactly what’s at stake before going down this path. 

You may still owe a chunk of cash

Even though you’ve returned the car, the remaining finance doesn’t disappear. If the auction value is low, the leftover balance could be significant. And you’re on deck to cover the difference. 

Your credit score could take a hit

Missed payments or unpaid shortfall? That could dent your credit score. If you struggle to repay what’s left, it could show up on your credit file and make future borrowing more difficult.

It’s not a protected right like VT, so you’ve got less control

Voluntary termination is enshrined in law. Voluntary surrender isn’t. That means fewer protections, and usually, worse outcomes.

In short? Voluntary surrender is usually a last resort. If voluntary termination or settlement is on the table, explore those first.

Can you return a car on PCH (lease)?

Yes, but only through voluntary surrender. PCH agreements don’t fall under the Consumer Credit Act, which means you don’t have the legal right to voluntary termination. If you want to return the car early, you’ll need to follow your lease provider’s early termination policy (and be prepared for potential fees). 

Termination options

  • Most lease agreements require you to pay the full remaining balance if you want to end early.
  • Some leasing companies offer early termination terms, like paying 50% of your remaining rentals.
  • Others may allow lease transfer, where someone else takes over the contract (though this isn’t always guaranteed).

Recommendations 

  • Check your lease agreement for early termination clauses.
  • Contact your leasing provider and request a termination quote.
  • Compare the cost of ending early vs. keeping the vehicle.

The verdict on whether you can return a car on finance with PCH? Yes, but PCH agreements are less flexible than HP or PCP, so exiting them early can be expensive.

Other ways to exit your car finance early

Voluntary termination and voluntary surrender aren’t your only options. Here are other common ways to end a finance agreement ahead of schedule.

Early settlement

You pay off the remaining balance of your finance agreement in full. This gives you full ownership (for HP or PCP).

Pros:

  • No ongoing repayments.
  • You may save on interest.
  • You own the car outright (except for PCP, where you may still need to pay the balloon payment).

Cons:

  • Requires a large one-off payment.
  • You need to request a settlement figure from your lender.

Part-exchange

You trade your current car in at a dealership and use its value to settle the outstanding finance.

Pros:

  • Quick and simple. The dealer handles the paperwork.
  • If your car’s value exceeds your remaining balance, the extra can go toward your next vehicle.

Cons:

  • Can you return a car on finance if your car’s worth less than the owed amount remaining? Yes, but you’ll need to pay the difference (called negative equity).
  • You may not get the car’s full market value from a dealer.

Renegotiation

If you’re struggling financially, it’s worth contacting your lender to discuss alternatives. Our advice? Be as honest as possible. Good lenders are usually more understanding than you might think. 

Options may include:

  • Extending your loan term to lower monthly payments.
  • Requesting a payment holiday or temporary reduction.
  • Switching to a different agreement that better suits your needs.

Don’t wait until you miss a payment. Lenders are more open to helping if you communicate early.

How to return a financed car: step-by-step

Returning a car on finance doesn’t have to be overwhelming. Here’s how to handle it from start to finish:

Review your contract terms and agreement type

Confirm whether you’re on PCP, HP or PCH. Request your full contract and look for terms on early termination, mileage and condition.

Check how much you’ve repaid

You may qualify for voluntary termination if you’ve repaid at least 50% of the total amount owed. If you’re close to that mark, it’s worth holding off a bit as VT usually works out better than voluntary surrender.

Speak to your lender

If using voluntary termination, notify the lender in writing. Include your contract number and clearly state your intent to terminate under Section 99 of the Consumer Credit Act. 

Request a settlement or termination quote

Ask your lender for your current settlement balance and a quote based on the return option you’re considering. Once you’ve got the figures, you can weigh up VT, early settlement, part-exchange or surrender to see which makes the most sense.

Arrange a return date and inspection

Your finance company will usually inspect the vehicle and confirm how it’ll be returned (either by drop-off or collection). Beforehand, give the car a clean, take out all your personal belongings and if you can, fix any obvious damage.

Document everything and keep copies

Hold on to all communication, including your return date documents and any final balance confirmations. A solid paper trail makes it much easier to resolve any issues later down the line.

FAQs

Can you return a car on finance early without penalty?

If you’ve repaid 50% of a PCP or HP agreement, you can terminate it without additional fees under voluntary termination. Outside of this, you may owe more.

Will returning a car affect my credit score?

Voluntary termination does not negatively impact your credit score, provided you follow the process properly. Voluntary surrender or repossession can damage your score.

What happens if I return the car before paying 50%?

You’ll need to top up the difference to meet the 50% threshold or consider voluntary surrender, which might leave you liable for the remaining balance.

Is voluntary termination a good idea?

Yes, for many it’s a fair and legally protected way to exit finance early. Just make sure the car meets wear and tear standards and that you’ve paid the required amount.

What if I’ve damaged the car or exceeded mileage?

You might face additional charges. PCP agreements, in particular, include excess mileage and condition clauses. Clarify any potential costs before pursuing this route so there are no nasty surprises down the line.  

Can you return a car on finance if I’ve lost my job?

If you’ve hit the 50% threshold, yes, you can exercise voluntary termination. Otherwise, speak to your lender about hardship options, deferment or renegotiation before missing payments.

Need to return your car?

Worried about what happens if you take out car finance and things change? You’re not the only one. Car finance is a big financial commitment so it’s normal to ask questions like “what happens if my circumstances change?” and “can you return a car on finance without penalty?”

Maybe your income takes a knock, your expenses change or the monthly payments just don’t feel manageable anymore. Whatever the reason, it’s important to know this: you do have options. And you certainly won’t be on your own.

At My Car Credit, we don’t just help you find the right car finance. We stick around if things shift. From voluntary termination to refinancing or exploring more affordable alternatives, our team can support you if you ever need to rethink your agreement down the line. 

We’ll help you understand your rights, explain your options clearly and work with you to find a solution that keeps you on track, without the stress. And if you have any questions about whether you can return a car bought on finance, we’re just a phone call away.

Still weighing things up?

When you work with My Car Credit, you’re not just signing up for car finance. You’re choosing support that goes the distance. This includes hands-on help if you choose to end your contract early. 

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

Is there VAT on Used Cars in the UK?

Woman driving in a used car

When you’re buying a car, VAT can add a hefty extra price tag, charged at a standard rate of 20% for new cars. So, if it’s a second-hand car in your sights, you might want to know ‘is there VAT on used cars in the UK?’ The answer to this question will vary depending on how the car is purchased. Read on to learn more.

Eligibility: is there VAT on used cars in the UK?

Ultimately, this will depend on how you buy your car. Firstly, if you purchase your used car from a private seller, then there will be no VAT to pay.

However, if you buy your used car through a car dealer, then whether or not you are charged will depend on how the dealership handles VAT. For this, there are two potential methods. If you’re wondering ‘is there VAT on used cars in the UK?’, then it’s important to understand the difference between these…

Second-hand margin scheme

This is the method used by the majority of car dealerships and involves only charging VAT on the profits made from the sale of the car. The rate charged will be 1/6th of the profit margin.

This VAT will be factored into the price of the car, rather than being recorded as a separate charge on the invoice.

VAT on the full selling price

In some cases, the dealer may charge VAT on the full selling price, which will naturally be more costly. However, this method is rarely used due to higher tax charges.

According to This is Money, both of these methods are completely legal, and you should remain aware that car dealers are under no legal obligation to inform you at the outset of the method they use to record VAT. So, due to the potential increase in costs, you should discuss the VAT method with the dealership before making a decision about whether to buy.

Spread the cost of your car

Whether it’s VAT or just the rising prices of used cars, the cost of your new ride doesn’t have to keep you awake at night! Try our car loan approval calculator to discover how much car finance you could be eligible for. It’s a quick and easy way to spread the cost of your new or new-to-you car.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

Can I Buy a Car with a Debit Card?

Person buying a car using their debit card

If you’ve found your dream car, have enough savings in the bank, and haven’t yet considered looking at your different car finance options, you may want to seal the deal immediately by paying with a debit card.

However, whilst this may sound like the easiest method of buying a car, it might actually come with some complications.

Can you buy a car with a debit card?

Technically, yes, you can buy a car with a debit card. Buying a car with a debit card may be advantageous for you, provided you have enough cash in your account when you make the payment. Be sure that your bank doesn’t have a cap on the card’s daily spending limit, too.

That said, it’s not quite that simple. Some dealers simply won’t accept payment via debit card. There are a number of reasons why this could be the case. Firstly, there are fees that come with this process which can result in dealers losing net profit on a sale.

Secondly, debit card payments are riskier for them. If you, the buyer, dispute the sale for whatever reason, this can cost the dealer money – particularly if you only dispute the sale once you’ve driven the vehicle, which means that it can’t then be re-sold at its initial price.

Debit card vs finance

If you do intend to pay for your vehicle with a debit card, be sure to check that the dealer accepts this payment method prior to entering any negotiation. However, most drivers will benefit from car finance as an alternative to spread the cost of a new car. Get a car finance quote today for a better idea of your budget.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!

Advantages and Disadvantages of PCP Car Finance

Man using ipad

Roughly nine in 10 of all new cars sold in the UK are purchased using finance, with personal contract purchase (PCP) loans accounting for a significant portion of sales, according to the latest data from the Finance and Leasing Association (FLA). With attractive interest rates, long repayment terms and the opportunity to get behind the wheel of your dream car faster, it’s no surprise PCP is one of the most popular car finance options in the UK.

Of course, it’s important to factor in your unique situation and develop an in-depth understanding of PCP loans before you commit. This guide is designed to help you understand all the advantages and disadvantages of PCP car finance. Armed with knowledge, you’ll be able to make an informed and educated decision about whether a PCP loan is right for you.

What is a PCP loan?

Before we get stuck into the advantages and disadvantages of PCP car finance, let’s take a moment to define what personal contract purchase means. The term describes a type of loan that sees you put down an initial deposit on a car (although there are no-deposit options), and then continue to make repayments.

It builds on the concept of hire purchase agreements and includes the option to purchase the car outright at the end of the loan. The main difference is that the final resale value of the vehicle is calculated at the beginning of the loan. This figure is known as the Guaranteed Minimum Future Value (GMFV) and is assessed using several factors, including the age of the car at the end of the loan, and expected mileage.

Most PCP loans start with a deposit of around 10% though this can vary depending on the lender, your credit rating and the unique terms and conditions of your contract. After making an initial deposit you’ll continue to pay monthly instalments plus interest over the lifetime of the loan. Most PCP loans span for two to four years – though again, this can vary.

When your loan ends and all instalments have been paid, you have the option to purchase the vehicle outright by making a balloon payment. The value of the balloon payment is calculated using the GMFV agreed on at the beginning of the loan. Alternatively, you can choose to return the car and start another PCP loan, which gets you behind the wheel of a new model. If the vehicle is worth less than the GMFV, you will need to pay the difference when returning the car.

Now you know more about the specifics of personal contract purchase, let’s take a look at the advantages and disadvantages of PCP car finance.

Advantages of PCP car finance:

  • Upgrade to a new car frequently

PCP loans usually span for two to four years and offer the option to roll on to a new contract after the final instalment has been made. Many motorists choose this option as it’s an easy and affordable way to regularly upgrade your car.

  • Low fixed monthly payments

The fixed monthly payments of PCP loans are generally lower than hire purchase (HP) contracts. This makes PCP loans an attractive option if you’re on a strict monthly budget.

  • Affordable deposits

As well as low fixed monthly payments, PCP loans require small deposits, often as low as 10%. Our car loan affordability calculator makes it easy to get an idea of how far your deposit will go.

  • Flexible options

Flexibility is one of the biggest advantages of PCP loans. Depending on the GMFV agreed on at the start of your loan, you can choose to roll over to a new PCP loan, make a balloon payment to own the car outright or simply hand back the keys with no more to pay. If you love the idea of flexibility and aren’t sure if you want to keep the car or return it at the end of the contract, PCP loans are a great option.

  • Finance secured against the car

Unlike other finance options, PCP loans are secured against the value of the car. This means you don’t have to rely on other assets like a home or cash investments.

  • Stretch your budget

With deposits as low as 10% and affordable monthly repayments, PCP loans stretch your budget much further than if you were to purchase a car with cash alone. This allows you to expand your search and consider cars that are newer or higher spec. In the long run, this can unlock big savings. For example, a PCP loan may mean you can afford a car with better mileage, which will significantly reduce your petrol expenses. Similarly, upgrading to a newer car with a PCP loan can slash maintenance and servicing costs.

Disadvantages of PCP car finance:

  • Capped mileage

Most PCP loans feature mileage caps written into the contract. This is because mileage can have a big impact on the value of a car. If you exceed the mileage cap used to calculate the GMFV at the start of your loan you could face extra charges. These may be applied whether you choose to return the car or purchase it via a balloon payment. Excess mileage penalties can be expensive and add a significant percentage to the total cost of your loan. To avoid nasty surprises at the end of your loan, it’s important to be realistic about your expected mileage when calculating GMFV.

  • Limits on wear and tear

Normal wear and tear is fine but if you plan to put your car through its paces on 4WD tracks or transport muddy pets on a regular basis, PCP loans can be a little restricting. Any damage that exceeds normal wear and tear can also see charges added to your final instalment or balloon payment.

Find out more about PCP car finance

Considering PCP car finance for your next ride? Our experienced team is always available to talk you through the advantages and disadvantages of PCP car finance. Get in touch by email or give us a call on 01246 458 810 to find out more.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

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 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

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!