Financing a Second-Hand Car: 4 Options

Friends going on a trip in a red car bought using car finance

It’s never been easier to find car finance for nearly new or used cars. Choosing to purchase a ‘new to you’ vehicle has many advantages. You’ll be able to split the cost of your vehicle into a series of affordable monthly instalments, potentially affording a better set of wheels than you would otherwise be able to. Plus, you’ll be improving your overall credit score.

But what options are there for financing a second-hand car? We break down how My Car Credit can help you to get behind the steering wheel of a nearly new or used vehicle below.

How to finance a used car

Used car finance is a catch-all term for car finance agreements that allow you to borrow money against a used or nearly new vehicle.

Remember to always do your research before purchasing a new or nearly new vehicle. You want to make sure that you’re in the know about everything from the vehicle’s condition through to its remaining warranty (if relevant), and its service history.

There are different kinds of car finance agreements that you can choose for your used car. The right deal for you will depend on your unique needs and circumstances.

It’s worth comparing the different kinds of used car finance available, so that you can make an informed decision and choose the right agreement for you. That way, you’re not forking out for anything you don’t need.

Financing a second-hand car – 4 options

Hire Purchase (HP)

HP used car finance is our most popular agreement. With HP, you can pay an initial deposit, followed by a series of monthly instalments. This initial deposit isn’t always necessary, but paying it means you’ll have lower monthly payments.

Your monthly outgoings are fixed, giving you greater budgetary control. You won’t face a final balloon payment, and will own the vehicle at the agreement’s end. Plus, you also won’t face mileage limits, or fines for excessive wear and tear.

HP used car finance is best for those looking to own their vehicle at the end of the agreement, and who’d benefit from no usage limitations. You will be expected to make higher monthly payments compared to other finance agreements.

Personal Contract Purchase (PCP)

With PCP, you’ll pay a deposit and regular monthly payments against your used or nearly new vehicle. These monthly payments are lower compared to other agreements (like HP) because you’ll pay a final lump sum (balloon payment) at the end of the agreement. This allows you to completely own the car. Alternatively, you don’t have to make the balloon payment and can hand the car back providing the car is in good condition and within the contracted annual mileage.

Personal Contract Hire (PCH)

PCH car finance can also be referred to as a lease agreement. Essentially, you’re renting the vehicle for a long-term period of time, before handing it back to the dealership. You’ll pay an initial deposit and can also benefit from features like breakdown and road tax coverage.

PCH used car finance is only suitable for those with good or excellent credit scores, who aren’t looking to own the car at the end of the agreement. You’ll also face charges if you exceed mileage limits or cause excessive damage.

Personal Loan

With a personal loan, you’ll borrow the full amount of the used or nearly new vehicle, paying this off via monthly repayments. Essentially, you’re buying the car outright, and you own it from the beginning of the agreement. This means that you can always choose to sell it any time after purchasing it.

A personal loan is the simplest financing option for a second-hand car, but is only suitable for those with a good credit score.

Is financing a second-hand car right for me?

There are many benefits to financing a second-hand car. You’re spreading the cost of what can be a very expensive purchase, potentially affording a nearly new vehicle that would be beyond your budget if you were buying outright. Plus, by making your monthly repayments according to schedule, you’ll improve your overall credit rating.

As with any finance agreement, if you fail to make your repayments, you’re at risk of losing the vehicle and negatively impacting your credit score.

Find out more about financing a second-hand car

Check out our post to find out more about your used car finance options. We also have a car finance calculator to help you do the maths on your next vehicle purchase.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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 Happens if I Can’t Pay My Balloon Payment?

Woman stood by her car refinancing her balloon payment on a mobile phone

Buying a new car is exciting. Whether you’re looking for a family-friendly drive, or a two-seater sports car, finding a new set of wheels can be fun.

However, a car is also likely to be expensive. In fact, after a house, a car is probably the second highest expense you’ll ever face. Car finance gives you the option of breaking down that expense into manageable chunks.

There are plenty of different types of car finance agreements available. With our wide range of lenders, you are sure to find one that accommodates your needs and circumstances – even if you have a poor credit score.

This article will break down what a balloon payment is, as well as what happens and your possible options if you can’t afford to pay it.

What is a balloon payment?

In order to understand what happens if you can’t pay a balloon payment, it’s worth outlining what these are. You can also check out our guide to how balloon payments work for more detail.

In car finance terms, a balloon payment is a one-off lump sum plus an option to purchase and possible admin fees, that you owe at the end of your agreement if you wish to own the car.

Not all car finance agreements have a balloon payment. For both Personal Contract Purchase (PCP) and lease agreements, you’ll face a balloon payment at the agreement’s end. Because you’re making this final balloon payment, you’ll benefit from lower monthly repayments during the term of your agreement. By making this payment at the end of a PCP agreement, you’ll own the car outright. On the other hand, it simply makes monthly payments lower for a lease agreement with no option to own the car.

A balloon payment is optional with PCP, but not optional with a lease agreement. If you don’t want to own the car at the end of your PCP agreement, you can hand it back or choose another finance agreement with the same lender as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

What happens if you can’t pay your balloon payment?

There are a number of eventualities if you can’t afford your balloon payment.

Late fees or penalties

In some instances, you may face late fees or penalties by the lender. These are additional charges on top of what you owe for the balloon payment.

Default and repossession

If you don’t confirm to your lender what end-of-deal option you want, they may automatically try to take the payment. If you don’t have the available money, you may therefore end up defaulting on the finance agreement.

There are any number of steps that a lender can take if you default on a loan. Your account may be sent to a debt collection agency to try and recover outstanding payments. This will have consequences for your credit score and future loan viability.

Alternatively, the lender may try to initiate repossession of your vehicle. This essentially means they reclaim the vehicle as collateral for the debt. This also has consequences for your credit score.

Legal action

In more extreme instances, you may face legal action, which could lead to a court judgment against you. Depending on the court order, the lender may be allowed to seize collateral to make up for the debt. Alternatively, you may be subject to wage garnishment, where an employer is required to deduct money from your salary until your debt is paid off.

Impact on credit score

In any of the above instances, your credit score will suffer. Defaulting on your car finance agreement and experiencing repossession will negatively impact your credit rating. A lower score then reduces your future loan viability, making it harder to obtain agreements. You’ll also likely face higher interest rates and less appealing terms for any future loans.

What to do if you can’t afford your balloon payment

If you can’t afford your balloon payment, you have some options.

Refinance your balloon payment

My Car Credit offers balloon payment finance. This works like any other finance agreement. You’ll break down the lump sum of the balloon into manageable monthly repayments.

We can help individuals with all credit profiles, using our large panel of lenders to find an agreement that’s right for you.

Negotiate with the lender

If you think you can’t afford your balloon payment, contact your lender sooner rather than later. You may be able to renegotiate the terms of the loan, benefiting from an extension or refinancing the balloon payment.

Hand back the vehicle

With PCP car finance, you don’t have to make the final balloon payment. You can hand the vehicle back at the end of the agreement as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

However, this isn’t suitable for those who need their car on a daily basis. Plus, you’ll have to shop around for a new finance deal for your next set of wheels. By making the balloon payment, you’ll own the car outright, and can use it as you please.

Sell or trade the vehicle in

Depending on your circumstances and the agreement, you may be able to either trade in or sell your vehicle if you can’t afford the balloon.

Remember that you’ll only be able to do so if its market value is enough to cover the outstanding balance on your loan.

Discuss balloon payment refinancing with My Car Credit

You have options if you can’t pay your balloon payment.

At My Car Credit, we work with individuals with all credit profiles to help them find the right balloon payment refinancing. Use our online calculator to get an instant, no-obligation quote for your expected monthly payments, rate of interest, and total payable amount. Please note that should you progress, some lenders may perform a hard search on your credit file.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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!

Balloon Payments Explained: What, Why & How

Black Tesla driving down the road bought with a Balloon Payment

Car finance has lots of confusing jargon – and a balloon payment is one example. Consider this article your ultimate guide to the what, why and how of balloon payments.

What is a balloon payment?

There are many different kinds of car finance available, depending on your needs.

Certain agreements allow you to make a final lump sum (the balloon payment) at their end. Once you’ve paid this one-time lump sum, along with an option to buy purchase and possible admin fees, the car belongs to you.

How does a balloon payment work?

A balloon payment works as a one-off lump sum you can pay at the end of your car finance agreement if you want to own your car.

With PCP, the one-off balloon payment is optional. You don’t have to pay it if you want to hand the car back or opt for a new finance agreement on another car.

The balloon payment is calculated based on the expected depreciation of your car (also known as the Guaranteed Minimum Future Value). It’s a fixed cost, meaning that no matter how much the value of your car fluctuates, it won’t rise.

Why choose car finance with a balloon payment?

There’s more than one type of car finance that allows you to own the car outright at the end of your agreement. With HP (hire purchase), you can own the car without making a final balloon payment (although there’s usually some admin fees to pay).

With that in mind, why would you want to choose car finance with a balloon payment?

HP finance has many benefits. However, because you’re not paying a final balloon fee, you’ll make higher monthly repayments compared to a PCP agreement.

A car finance option with a balloon payment is, therefore, a better choice for you if you want lower monthly repayments and if you regularly update your wheels.

What happens if I can’t afford my balloon payment?

If you’re keen to own your car outright at the termination of your finance agreement but can’t afford the balloon payment, don’t panic.

At My Car Credit, we understand that not all drivers have the cash for their balloon payment. That’s why we have balloon payment finance. With this agreement, you’ll break down your final balloon payment into manageable monthly instalments.

Apply with balloon payment finance with My Car Credit

No matter your circumstances, you can check if you are eligible for car finance with our handy online calculator. Our initial credit check is only a soft search, too – meaning it won’t impact your credit profile! Please note however that should you progress, some lenders may perform a hard search on your credit file.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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 Do Balloon Payments Work?

Red and black cars bought using a Balloon payment

One of the many benefits of car finance is its flexibility. The range of car finance agreements means you’re guaranteed to find one that works for your unique needs and circumstances.

With that said, this range of options may make your decision feel overwhelming – and that’s not to mention the jargon involved in any choice!

This article will break down what a balloon payment is, how they work, and whether they’re right for you. By demystifying one of the more confusing terms associated with car finance, we’ll help you to decide whether car finance with a balloon payment is right for you.

What is a balloon payment?

In car finance terms, a balloon payment is a one-off lump sum that you pay to your lender at the end of certain finance agreements.

Both Personal Contract Purchase (PCP) and lease agreements have a final balloon payment that you can make at the agreement’s end. Making this payment means that you’ll own the car outright.

How do balloon payments work?

With both PCP and lease agreements, you’ll face a balloon payment at the agreement’s end (plus an option to purchase fee and possible admin fees).

Be aware that with PCP, a balloon payment is optional – you don’t have to pay it. You can choose to hand the car back to the lender or opt for a new finance agreement on another car. With a lease agreement, a balloon payment is not optional.

The amount you’ll pay for your balloon payment is calculated according to your lender’s estimation of your car’s depreciation. This is known by many names – the ‘Guaranteed Future Value’ (GFV), ‘Guaranteed Minimum Future Value’ (GMFV) and ‘Residual Value’ (RV). We’ll call it by the GMFV here.

The GMFV predicts the value of your car at the end of your finance agreement. Your lender will estimate this based on factors including the vehicle make and model, yearly mileage estimates, and the length of your agreement.

The GMFV (the balloon payment) is a fixed cost that’s written into your car finance contract. It can’t fluctuate based on your car’s actual value.

As such, even if your car is worth less at the end of your agreement than the GMFV estimation through no fault of your own, you don’t have to pay to make up the difference. Alternatively, if your car is worth more, you can find yourself in positive equity. This allows you to either make the final payment and sell the vehicle on for a profit – or put that equity towards another car finance agreement with the same lender.

What are the benefits of car finance with a balloon payment?

Don’t forget to check out our guide to the eight advantages and disadvantages of a balloon payment for a more comprehensive breakdown of their pros and cons.

Lower monthly payments

Compared to car finance agreements like Hire Purchase (HP), car finance with a final balloon payment has lower monthly payments.

You get to own your vehicle

If you love your vehicle and want to keep it, you can! Otherwise, you have two options available to you. You could part-exchange the vehicle for a newer, more modern vehicle, or simply hand the keys back, as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

What are the drawbacks of car finance with a balloon payment?

Usage restrictions

Car finance agreements like PCP do have vehicular usage restrictions. These may include a yearly mileage limit, and you’ll pay extra if you incur excessive damage.

These restrictions are established because of your lender’s prediction of your car’s GMFV. If you breach these restrictions, you can impact this estimation, and will be penalised.

Payment shock

A car finance agreement with a balloon payment means you’ll pay lower monthly instalments. However, this can mean that the balloon payment is expensive, and you may find yourself experiencing payment shock.

If you do find yourself in this position, you can benefit from balloon payment finance.

Not ideal for those with lower credit ratings

At My Car Credit, we understand that not all drivers have exceptional credit scores, and thanks to our wide range of lenders, we can accommodate all kinds of credit profiles.

If your credit score is less than ideal, you’re less likely to qualify for car finance with a balloon payment. Therefore an agreement without a balloon may be more suitable.

What happens if you can’t afford your balloon payment?

There can be any number of reasons why you may find yourself unable to pay your finance agreement’s final balloon payment.

My Car Credit understands that not all drivers may have the cash upfront to be able to make your balloon payment. Balloon payment finance provides one solution, working just like a car finance agreement. By breaking down the balloon payment’s lump sum into manageable monthly repayments, you have better budgetary control.

Use our online calculator to receive an instant no-obligation decision on balloon payment finance. Our initial credit check won’t impact your score, and we’ll leverage our large panel of lenders to find a deal that’s best for you. Please note that should you progress, some lenders may perform a hard search on your credit file.

Is a balloon payment right for me?

Car finance agreements with a balloon payment have various advantages. From lower monthly repayments to a guarantee of your vehicle’s future value, having an agreement with a balloon payment can be beneficial. Plus, with PCP finance, you don’t have to make the final lump sum – you can enter another finance agreement on a different car with the same lender. This is great for people who like to regularly update their wheels.

With that said, if you’ll struggle with usage limits or are prone to damaging your car, you may need to consider your options. Plus, you’ll have to evaluate your financial situation. Plan ahead to ensure that you can make the final balloon payment or consider balloon payment finance to avoid facing payment shock.

Wondering if you are eligible for My Car Credit car finance?

Do the maths on your next car with our handy online calculator and discover how My Car Credit can help you find the right car finance.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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!

8 Advantages and Disadvantages of a Balloon Payment

Shiny car bought using a balloon payment

How do you know if a car finance agreement with a balloon payment is right for you? The first step is to understand the advantages and disadvantages of a balloon payment. Read on as we look at 4 advantages and 4 potential disadvantages.

What is a balloon payment?

A balloon payment is the one-off lump sum, plus an option to purchase and possible admin fees, that you can pay at the end of certain car finance agreements like PCP. By making this payment, you’ll own the car outright.

Balloon payments aren’t obligatory with PCP – at the end of your finance agreement, you can always hand the car back, or choose another finance agreement on a different car.

Any balloon payment is calculated on the expected depreciation of your car (also known as the Guaranteed Minimum Future Value or Residual Value).

The GMFV or RV predicts what the car will be worth at the end of an agreement, based on your usage estimates. The factors that will impact its value include the make and model of the car, your yearly mileage estimates, and the length of your finance agreement.

The GMFV or RV is a fixed cost – it won’t fluctuate based on your car’s value.

Advantages of a balloon payment

Lower monthly repayments

Other car finance agreements like Hire Purchase (HP) give you the option of owning the vehicle at the agreement’s end.

However, with HP, you don’t pay a final balloon payment. As such, you’ll face higher monthly repayments than you would with a car finance agreement that has a final balloon payment.

Fixed cost

A balloon payment is calculated based on your lender’s estimation of depreciation in your car’s value – the Guaranteed Minimum Future Value or Residual Value. This is a fixed cost – it won’t fluctuate throughout your car finance agreement, even if your car’s value changes.

Sometimes, finance companies may get your car’s value (its GMFV or RV) wrong. It can depreciate in value more than expected, meaning you’re in negative equity.

However, the balloon payment is a fixed cost. As such, if you find yourself in negative equity through no fault of your own (not breaching usage restrictions), you still won’t face any additional fees.

Potential for positive equity

Your car’s value may depreciate less than was predicted.

If your lender undervalues your car’s GMFV or RV, you could, therefore, find yourself in positive equity. This means that you find yourself at the end of an agreement with a vehicle that’s worth more than your finance company estimated.

You can then choose to make the final balloon payment and sell the car on for a profit. Alternatively, if you stay with the same finance company, you can put this positive equity towards the deposit on a new vehicle.

You get to own your vehicle!

If you love your car and want to keep it, you can! Otherwise you have two further options available to you. You could part-exchange the vehicle for a newer or different model or simply hand the keys back, as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

Disadvantages of a balloon payment

Usage restrictions

Car finance with a final balloon payment typically requires usage restrictions. You may be expected to keep under a certain mileage, and you are expected to return the car in good condition at the agreement’s end.

If you go over these usage restrictions, you’ll be penalised. This is because your lender will base your car’s depreciation value on these usage restrictions. Breaching them will impact the accuracy of this value, which can have financial ramifications.

Not ideal for those with lower credit scores

If your credit score is less than ideal, you’re unlikely to qualify for car finance agreements with a balloon payment.

Therefore an agreement without a balloon may be more suitable if your credit rating is low.

Not optional for lease agreements

With PCP, the balloon payment is optional. However, this payment isn’t optional with a lease purchase agreement – you’ll have to pay the final lump sum.

Expensive final payment

The balloon payment can be a hefty sum. You may not have access to the cash needed to make this payment.

However, you can choose to refinance your balloon payment in this instance.

How do I refinance my balloon payment?

With balloon payment finance, you’re refinancing your balloon payment. This allows you to break down the lump sum into affordable monthly payments. You’ll also have an extended loan time, and you may be able to access better interest rates.

Wondering if you are eligible for My Car Credit car finance? Do the maths on your next car with our handy online calculator.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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 the Oldest Car a Bank Will Finance?

2 vw camper vans parked in a field

Love the charm and character of older cars but unsure about whether they’re eligible for finance? In this hands-on guide we’ll answer “what is the oldest car a bank will finance”. Our goal – to help you get behind the wheel of a car with its own unique story to tell.

The golden numbers

While there’s no hard and fast rule about what the oldest car a bank will finance is, 10 years is generally considered the maximum age for standard agreements. Most high street banks require cars to be no more than 10 years old, with no more than 100,000 miles on the odometer.

Exceptions to the rule

While 10 years and 100,000 miles are considered the maximums for bank-funded auto finance, there are some exceptions to the rule. For example, classic cars are often eligible for finance agreements. What’s the difference between ‘classic’ and ‘older’ cars? There are similarities between the two, however most banks see them as very different candidates for auto finance.

Defining a ‘classic’ car

According to HMRC, classic cars must be at least 15 years old and have a minimum value of £15,000. This is ultimately what sets classics apart from older vehicles. Unless the car meets these prerequisites, banks will generally be reluctant to approve auto finance.

Prefer the gleam of a newly polished hood ornament over the glow of a next-gen touchscreen dashboard? You’re not alone. The UK is a nation of classic car enthusiasts, with the latest stats from the Federation of British Historic Vehicle Clubs (FBHVC) revealing there are more than 1.5 million classics currently registered in the UK.

Dreaming of securing the keys to a pristine pre-war Bentley or a British-built Lotus Elise? Read on to find out more about what the oldest car a bank will finance is and how auto loans work for classic vehicles.

Understanding classic car finance

Unlike traditional auto loans, classic car finance operates within a niche market. Agreements are often tailored to meet the unique needs of vintage automobile enthusiasts, which means financing a classic car can be a little different from the usual process.

Factors influencing classic car finance

Several factors come into play when determining the oldest car a bank will finance. These can include:

Age of the vehicle

One of the first variables banks assess is the age of the classic car. What is the oldest car a bank will finance? While there’s no set rule on the maximum age of a vehicle eligible for financing, most banks tend to favour classics from the post-war era onwards. That said, some specialty lenders may extend financing for exceptionally rare or historically significant vehicles, regardless of age.

Condition

The condition of the classic car plays an important role in securing financing. Banks are more likely to finance well-maintained or meticulously restored classics with documents to back up their past.

Rarity

Rarity, historical significance and desirability among collectors can increase the likelihood of securing finance for older vehicles.

Appraisal and valuation

Before extending financing for a classic car, banks often request a comprehensive appraisal and valuation of the vehicle. This helps determine the market value, authenticity and overall condition of the classic car. Why does this matter? It helps provide banks with confidence in the value of the asset they’re financing and potential resale value.

Types of classic car financing

Classic car financing options vary depending between lenders, so it’s important to do your research and find the right fit. Banks generally take a more conservative approach to finance and stick with popular options like Hire Purchase and Personal Contract Purchase.

Hire Purchase (HP)

This option sees you make a deposit upfront, followed by fixed monthly payments. These payments cover the full purchase price of the classic car, plus interest. Once the final payment is made, legal ownership of the vehicle is transferred to the borrower.

Personal Contract Purchase (PCP)

PCP offers lower monthly payments than HP, as you effectively lease the classic car for a set period of time. At the end of the agreement, you have the option to return the vehicle, trade it in for a different model, or make a balloon payment along with and option to purchase and possible admin fees, to take ownership.

Personal Loans

Personal loans can be a good way to finance a classic car purchase and provide lump-sum financing for the total cost of the vehicle. In exchange, you’ll commit to fixed interest rates and repayment terms.

Navigating your classic car finance journey

From sleek Jaguar E-Types to James Bond-worthy Aston Martins, classic cars are genuine head turners. However, complications can arise when attempting to secure finance. Here are some expert tips on how to improve your chances of success.

Research and due diligence

Before approaching a bank for classic car financing, take the time to thoroughly research the make, model and historical significance of the vehicle. Gather as much documentation as possible, including appraisal reports, maintenance records and ownership history. The more documents you have to support your finance application, the better!

Consider specialty lenders

Feeling disheartened after your application for auto finance has been knocked back? Remember, the buck doesn’t necessarily stop with high street banks. Consider working with a broker like My Car Credit to unlock access to specialty lenders with experience financing classics. Unlike banks which often adopt a conservative and inflexible approach, brokers work with a wide range of lenders, including lenders willing to finance vintage automobiles.

Insurance requirements

Your classic car financing agreement may come with specific insurance requirements to protect the value of the asset and minimise risk for the lender. For this reason, many lenders will insist you have comprehensive classic car insurance in place before finalising the agreement.

The bottom line on financing old cars

Ultimately, there’s no definitive answer to “what is the oldest car a bank will finance?” That said, there are some benchmarks to keep in mind. Banks will generally knock back applications for auto finance if the car is more than 10 years old, with more than 100,000 miles on the odometer. Unless the car qualifies as a ‘classic’, which means it must be at least 15 years old and have a minimum value of £15,000.

Secure the keys to a classic with My Car Credit

Got your heart set on a classic car? Whether you’re dreaming of a mid-century Chevrolet or a Mini in mint condition, My Car Credit is here to help you enjoy the thrill of vintage motoring. We work with a large panel of lenders to maximise your chances of success, with classic car finance options including high street banks as well as non-traditional lenders. 

Try our handy online finance calculator to find out more about your options.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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 Does Classic Car Financing Work?

Classic Mercedes driving down the road

Whether it’s a first generation Ford Escort or an iconic Porsche 911, classic cars hold a special place in the hearts of motoring enthusiasts. Yet for many Brits, the path to classic car ownership can seem complex, especially when it comes to financing. Not to worry, we’re here to help.

In this practical guide, we’ll answer all your questions about how classic car financing works. We’ll unpack how classic car loans work, break down the application process and explore the different financing options available in the UK.

Understanding classic car financing

How does classic car financing work compared to standard auto loans? While the pair share many similarities, it’s important to understand the differences between the two. Classic car loans are designed with vintage automobiles in mind, which means there are some unique factors that come into play:

Age

In general, a car must be at least 15 years old to be considered a classic. This is the age cited by HMRC in the official definition of a classic car.

Vintage appeal

While cars become eligible for classic status at 15 years or older, lenders also factor in vintage appeal. Vehicles from the post-war era, like the much-loved Morris Minor and iconic Aston Martin Atom, are generally favoured by lenders. That said, it’s not unusual for exceptions to be made for exceptionally rare or unique models.

Condition

The overall condition of cars plays an important role in securing finance. For example, lenders are far more likely to finance a Morgan Plus 4 roadster in mint condition than the same model in need of serious work.

Documentation

Lenders won’t always take your word for it when it comes to factors like age and condition. This is where documentation comes in useful. Anything related to the vehicle’s background, service history and overall vintage appeal can help improve your chances of securing classic car finance.

Market value

Lenders will usually assess the market value of the classic car before extending financing. Potential appreciation may also be considered. Typically, lenders will want to see a value of at least £15,000. Factors like condition, rarity, historical significance, documentation and desirability can all influence the appraised value of the car and ultimately, eligibility for finance.

Classic car financing options

Now you know more about how classic car financing works, let’s take a closer look at some of the different payment plan options available in the UK. Like standard auto loans, classic car finance agreements are designed to cater to different needs and preferences.

Hire Purchase (HP)

Simple and easy, HP agreements start with an initial deposit followed by fixed monthly payments to repay the total purchase price of the classic car, plus interest. When the contract is complete and the loan is fully paid off, legal ownership of the vehicle transfers to the driver. The HP model essentially sees the lender purchase the car outright, then provide the borrower with a structured payment plan.

Personal Contract Purchase (PCP)

Lower monthly payments make PCP one of the most popular ways to finance a classic car. Instead of covering the total purchase price of the car, monthly payments cover the cost of renting the vehicle from the lender for a set period, generally three to five years. At the end of the contract, you have the option to make a ‘balloon’ payment to cover the remaining value of the vehicle and purchase the car outright. Alternatively, simply return the vehicle to the lender, as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

Personal Loans

How does classic car financing work for a personal loan? This option sees lenders extend lump-sum financing to cover the full purchase price of a classic car. As well as the total purchase price, monthly repayments factor in interest and other fees.

Get behind the wheel of a classic with My Car Credit

Ready to embrace the joys of vintage motoring? At My Car Credit we specialise in securing auto finance loans for all kinds of vehicles, including classics. Give our online finance calculator a try and find out how My Car Credit can help you obtain that classic car of your dreams.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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!

Car Finance or Personal Loan – Which is Best for You?

Couple comparing Personal Loan and Car Finance

Millions of new and used vehicles are purchased using finance every year in the UK. When securing funds, most motorists choose between two popular options – car finance or personal loan. Both are designed to get you behind the wheel of your dream car, though each option has its own pros and cons.

Car finance: options and ownership

Car finance is an umbrella term used to describe several types of auto loans, including options like Hire Purchase (HP), Personal Contract Purchase (PCP), Personal Contract Hire (PCH) and Conditional Sale. Each option is slightly different in terms of deposits, monthly payments, legal ownership and end-of-term options.

Pros of car finance:

Lower initial costs: Initial deposits are generally lower for car finance, compared to purchasing a vehicle outright. This can be an advantage if you want to retain capital and keep your upfront expenses as low as possible.

Flexibility in ownership:

What’s more flexible, car finance or loan? Depending on the type of agreement, car finance generally offers options at the end of the term, including owning the car outright or upgrading to a new model.

Access to new models: Car finance options like Personal Contract Hire are designed to get you into the driver’s seats of the latest models. The chance to drive newer or more expensive models that may otherwise be outside your budget is a major benefit for some motorists.

Maintenance included: Some car finance options include maintenance packages which takes the stress out of ownership.

Cons of car finance:

Monthly payments: While monthly payments may be lower, they accumulate interest over time which can increase the total cost of your loan.

Ownership delays: With some car finance options, you don’t own the car outright until the final payment is made. This can be an important factor when deciding between car finance or personal loan. 

Personal loan: simple and straightforward

A personal loan sees you borrow the full amount needed to purchase a car outright. You drive away as the legal owner of the vehicle and make monthly repayments to your lender to cover the cost of the loan, plus interest.

Pros of personal loans:

Instant ownership: With a personal loan, you own the car from day one. For many motorists, this makes the car finance or loan decision easy.

No mileage restrictions: Unlike some car finance agreements which come with mileage restrictions, personal loans give you the freedom to drive as much as you like without worrying about penalties.

Cons of personal loans:

Higher interest rates: Unless you have a stellar credit score, personal loans can come with higher interest rates compared to some car finance options.

Strict eligibility criteria: Securing a personal loan generally requires a good credit score, and eligibility criteria can be more stringent.

Higher initial costs: Personal loans often call for larger upfront payments.

Enjoy tailored auto finance with My Car Credit

Need help deciding between car finance or loan? Want to find out if car finance is easier to get than a loan?

At My Car Credit, we appreciate that every motorist is unique. That’s why we work with every client to build tailored financing solutions to match your budget, personal preferences and ownership goals.

Give us a call on 01246 458 810 to find out more about car finance options or email us at enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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!

PCP vs HP – What’s the Difference Between Them?

Car driving up piles of money
When it comes to car finance, a standardised approach doesn’t always work. Every motorist is different, which is why lenders offer a variety of models, including personal contract purchase (PCP) and hire purchase (HP). Both are hugely popular in the UK and used to finance everything from budget-friendly hatchbacks to luxury EVs.

Each option offers unique benefits, so how do you decide which is right for you? In this comprehensive guide, we’ll cover everything you need to know about PCP vs HP, including how they work and the key differences between the two financing options.

Understanding the difference between HP and PCP

Let’s start with a breakdown of each financing option:

Personal contract purchase (PCP)

In a PCP agreement, the goal isn’t to own the car outright. Instead, you effectively rent it for a set period, typically two to four years. Your monthly payments cover the car’s depreciation over this period, as well as interest.

At the end of a PCP agreement, you have three choices:

  1. Return the car
  2. Trade in the car for a new model
  3. Make a balloon payment to buy the car outright. Balloon payments are lump sums agreed on at the start of your contract and calculated using the guaranteed minimum future value (GMFV) of the car.

Hire purchase (HP)

Hire purchase is a more straightforward financing model and puts you on a direct path to ownership. The total cost of the car, minus any deposit paid upfront, is spread over fixed monthly payments. Once you make the final payment, the car is yours to keep. There’s no need for a balloon payment at the end of the contract and you don’t have the option to return the vehicle. If ownership is your end goal, HP is a great option.

PCP vs HP: how the two compare

Now you know more about how each auto finance model works, let’s take a look at how they shape up against each other.

Ownership

PCP offers flexibility but stops short of ownership unless you’re willing to make a balloon payment. As mentioned earlier, you can choose to return the car at the end of the agreement. This makes PCP an attractive option for motorists who love to upgrade to a new model every few years.

The option to own is an important difference between HP and PCP. Once the final payment is made on a HP agreement you become the legal owner of the vehicle. This makes HP ideal for motorists with long-term ownership goals.

Monthly payments

Affordable monthly payments are one of the top benefits of PCP. They’re generally lower than HP payments as you’re covering the car’s depreciation, not its full value.

Monthly payments are higher for HP agreements as you’re paying off the entire cost of the car, plus interest.

Balloon payment

The need for a balloon payment at the end of a PCP agreement can catch some motorists off guard.

In comparison, monthly payments made on HP agreements are designed to cover the full cost of the car which means you won’t be hit with a lump sum at the end of your contract.

Mileage limits

PCP agreements often come with mileage restrictions, with additional charges incurred for exceeding your cap. This can make PCP limiting for high-mileage motorists.

With HP, you’re free to drive as much as you like without worrying about mileage restrictions or penalties. For many motorists, this freedom makes the PCP vs HP decision easy.

Customisation options

Since you’re essentially leasing the car in a PCP agreement, there may be restrictions on customisations.

HP gives you the freedom to modify your vehicle. Whether it’s a custom paint job, tinted windows, tech upgrades or seating configuration, this is a big difference between HP and PCP.

The bottom line on PCP vs HP

Ultimately, there’s no hard and fast answer when it comes to the PCP vs HP debate. What’s best for you depends on your individual preferences, financial situation and driving habits. PCP offers flexibility, affordability and options at the end of your contract, while HP prioritises ownership. Be sure to factor in your long-term plans when deciding and consider how each option aligns with your personal goals.

Need a hand deciding which is option is right for you? At My Car Credit, we pride ourselves on offering friendly, personalised support to British motorists. This includes helping you understand the difference between HP and PCP. As well as PCP and HP, our team can get you up to speed on other popular car finance options, including conditional sale and personal contract hire (PCH).

Get in touch with a team member on 01246 458 810 to find out more or email us at enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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 a Conditional Sale for a Car?

Car keys being handed over
While prices have dropped a little in 2023, the average cost of a new small car in the UK sits at more than £21,000. Opt for larger models and RRP increases significantly. Combined with issues like inflated petrol prices and the cost of living crisis, this figure puts car ownership out of reach of most motorists. With many Brits feeling the pinch, it’s no wonder auto finance options like conditional sale have surged in popularity over recent years.

There’s plenty to learn when it comes to car finance and conditional sale is one of many terms you may recognise. But what is a conditional sale exactly and how can it help you secure the keys to your dream car? Read on as we dissect everything you need to know about conditional sales, including how agreements work, the benefits and what to expect when signing a contract.

Understanding the basics of conditional sale

What is a conditional sale and how can it help you own your own car? The term describes a popular finance model that allows you to spread the cost of car ownership over a set time period, usually between two to five years. It’s essentially a personal loan that’s secured against the vehicle and funded by a lender. The finance provider pays for the car outright and maintains legal ownership of the vehicle for the duration of the contract.

As the borrower, you make regular repayments to the lender which cover the total cost of the car, plus interest accrued over time. After making your final payment, ownership of the vehicle is transferred to you. The model is straightforward and transparent, making conditional sale a great option for Brits who like to keep things simple. It offers a direct route to ownership without complications like mileage limits, wear and tear penalties or options to return the car or renew the contract at the end of the agreement.

Whether you’re looking at compact urban commuters like the Ford Fiesta or spacious, family-friendly SUVs like the Hyundai Tucson, Conditional Sale can be used to finance a huge range of makes and models. This flexibility is another key benefit associated with conditional sales.

Conditional sale vs hire purchase

What is a conditional sale agreement and how does it compare to hire purchase? If you’re familiar with the car finance landscape, you may draw comparisons with conditional sale and hire purchase (HP). And you’d be absolutely right. Conditional sale and HP share similarities and work in almost the same way, though there’s one major difference.

When a HP agreement winds up, you’ll need to pay a modest “option to purchase” fee to assume legal ownership of the vehicle. In comparison, conditional sale sees you automatically assume ownership after the final payment is made.

How conditional sale works

Now we’ve covered what a conditional sale agreement is, here’s a step-by-step breakdown of how the process works:

  1. Choose your make and model

Like other auto finance options, conditional sale starts with choosing your dream car. Whether it’s a fresh out the showroom model or a used gem with low mileage and a great service history, conditional sale offers the flexibility to choose a vehicle that suits your personal budget, lifestyle and driving preferences.

  1. Agree on terms

When you’ve chosen your new set of wheels, it’s time to agree on the terms of your conditional sale contract. This includes the duration of the agreement, along with your interest rate.

  1. Make your deposit

Most conditional sale agreements start with an initial deposit designed to offset the total cost of the car. Keep in mind that your deposit can also help bring down your monthly payments and reduce the total amount of interest paid over the duration of the agreement.

  1. Pay monthly instalments

The remaining balance of your car loan, minus your initial deposit, is split into fixed monthly payments. These payments cover both the principal loan amount as well as interest. For many Brits, the sense of financial stability that comes with conditional sale contracts is a major benefit.

  1. Claim ownership

Unlike some auto finance options where you may have to return the vehicle or make a balloon payment at the end of the contract, conditional sale is all about easy ownership. After the final payment is made, you’re officially the legal owner of the car.

Why choose conditional sale?

Knowing what a conditional sale is gives you a few clues as to why it’s so popular with British motorists. Here’s a closer look at some of the top benefits:

A road to ownership

Ownership is the end goal of conditional sale contracts. Your payments cover the cost of the car which means you’re continually working towards ownership. There are no mileage restrictions, hidden costs or headache-inducing calculations to navigate. Instead, simply make your final payment and drive away as the legal owner of the vehicle.

No balloon payments

For many motorists the concept of balloon payments used in models like PCP can be frustrating. In contrast, conditional sale distributes the total cost of the car evenly over a pre-determined time period. This can make budgeting more predictable and means you’ll enjoy full ownership at the end of the lease.

Mileage flexibility

Conditional sale liberates you from the mileage caps that typically accompany PCP agreements. You’re free to drive as much as you like without worrying about breaking the terms of your contract and incurring penalties.

Customisation options

With full ownership, you have the freedom to modify your vehicle as you please. Whether it’s a unique paint job, upgraded tech or personalised accessories, the car is yours to customise.

Take the wheel with My Car Credit

Ready to get behind the wheel? My Car Credit can help you secure the best conditional sale deals, tailored to your personal needs. Our friendly team is here to answer all your questions about what a conditional sale is, provide guidance and ensure your road to car ownership is as smooth and stress-free as possible.

Looking for something different? At My Car Credit we specialise in matching clients with the best auto finance options for their needs. Every motorist is different which is why a one-size-fits-all approach never cuts it. Instead, we carefully assess every application to find the perfect match.

As well as conditional sale, we offer other popular car finance options like Hire Purchase (HP), Personal Contract Purchase (PCP) and Personal Contract Hire (PCH). It’s this open-minded approach, combined with access to a wide range of high street and non-traditional lenders, that gives us a competitive edge over other brokers.

Give us a call on 01246 458 810 to find out more or email us at enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 12.4%

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 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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!