Where Can I Get a Car Loan in the UK?
Got your heart set on a new car? Before you can slide into the driving seat, you'll need to figure out how you're going to pay for your new wheels. If you don't have the cash to buy the car outright, car finance will make it more accessible by dividing the cost into monthly payments.
There are several different types of car loans that will allow you to access the money you need to purchase a new or used car, electric, hybrid, or petrol car. The trouble is, it’s hard to find out what’s best for your situation. Where can you get a good car loan in the UK? How do you get a car loan in the UK? Let’s explore! 🔍
What is Car Finance?
Most people in the UK can't afford to buy a car outright. As a result, an increasing number of consumers are turning to car finance as an alternative. It is an excellent method for obtaining your dream car, especially if you can't afford the cost of a large, upfront payment.
With car finance, you can buy a car without having to spend a significant chunk of money upfront. Instead, you will make monthly repayment amounts for the car. Car finance is effectively another way of talking about a loan that covers the cost of the car, allowing you to spread out the price over several months or years.
The lender retains ownership of the vehicle until the loan balance, plus any interest or other charges is fully paid off. However, you will continue to enjoy full use of the car while making your monthly payments. And once you've paid in full, the car is yours to retain if you decide to go for that option.
The Different Types of Car Finance
The three main types of car finance are Personal Contract Purchase (PCP), Hire Purchase (HP), and the personal loan. There also is leasing, which doesn’t completely fit under car finance, since it entails loaning a car, not purchasing it. But it is one way to drive a car without actually purchasing it, which will suit some people.
Personal Contract Purchase (PCP)
Personal Contract Purchase is one of the most popular types of new car financing, but it may also be the most complicated. You will not buy the car outright using PCP. Instead, you'll put down a deposit (10% of the value of your car) and borrow the balance of the money. You will then make monthly payments to cover the interest and depreciation costs. Then if you want to own the car at the end of the term, you will need to make an additional "balloon" payment.
Hire Purchase (HP)
A deposit is frequently required for Hire Purchase arrangements, although that isn't always necessary. You'll then make monthly payments toward the cost of the car, but you won't own it (or be able to sell it privately) until the final payment is made - along with an additional 'option to purchase' charge, which can be approximately £100-£200, although here at Carmoola we only charge a nominal £1! This isn't the same thing as buying a car with a personal loan, where you would buy the car entirely at the start of your repayment plan.
A personal loan is basically something that gives you the money to buy a car outright. You will then repay the loan over a certain period of time, generally at a fixed interest rate.
A personal loan has the advantage of being unsecured, which means you won't put an asset (such as your car or your house) up as collateral. Because an unsecured loan carries less risk for you but greater risk for the lender, you may need an excellent credit score to be authorised.
Where Is The Best Place to Get a Car Loan?
Going for the best car finance provider might prove to be more difficult than anticipated. It's critical to do your homework before entering into a loan deal. That's why we're going to discuss the different types of car finance providers and where to get a good car loan in the second half of this article.
Car Dealership Loans - Good or Bad?
Many car dealerships and marketplaces in your area will provide their own type of financing, whether in collaboration with a bank or through a specific car manufacturer. In truth, dealerships will occasionally offer seemingly appealing incentives like 0% interest rate financing. This may appear to be quite tempting, but don't fall for it. Car dealers and manufacturers raise car pricing in order to provide discounted financing to allure buyers, resulting in a more expensive car but a lower loan.
After you've agreed on a car price, some sellers may attempt to sell you additional vehicle accessories. They will want you to purchase extras like audio systems, warranties, and various insurance coverage. Be aware that this can happen and don’t fall for any sneaky sales techniques. Always go away and reflect on what they are offering an what other "extras" you might want to purchase but don't be pressurised on the day - there could be better deals available elsewhere - go and do your research and get some quotes before you commit.
Local Banks Offering Personal Car Loans
A personal loan from your local bank is most likely available for car finance. Unfortunately though, if you have bad credit or have been declared bankrupt in the past, it may be difficult to obtain a personal loan to buy a car. You'll also experience high interest rates, even if you do have a satisfactory credit score, making a personal loan at your local bank unlikely to be the most cost-effective alternative.
Online Car Finance Providers - How to Get a Car Loan
Okay, but can I apply for a car loan online? In this day and age, opting for an online solution is often better if you want an effective and flawless service. Banking, shopping, and even car financing are all easier and faster to accomplish online!
In this day and age, opting for an online solution is often better if you want an effective and flawless service. Banking, shopping, and even car financing are all easier and faster to accomplish online!
For example, you can get a car loan in a matter of seconds with Carmoola. It's all centralised within a single app, which not only allows you to secure a car loan in minutes but also gives you the freedom to manage your loan easily during its term. For example if you want to make overpayments you can just do that yourself on the app. Simple as that!
The best way to get car finance for you will be determined by your financial status and ability to repay the loan. Buyers with good credit may find it easier to obtain a personal loan from a bank or through a vehicle finance business. Whatever you go for you will want to get the best interest rate (or APR) you can in your circumstances, and depending on your credit rating.
If you're still not sure what to go for, we suggest you keep browsing through your options and wait until you find something that is perfect for your circumstances. You can choose between HP, PCP and a personal loan.
There are several car finance providers in the UK, many of which operate online. For example, with Carmoola, everything is handled within the app - no paperwork or face-to-face meetings required. Going online makes it simple to look for and compare different offers. Always compare using the APR which everyone calculates in the same way, so it's great comparison tool
Have any questions? We’re open 24/7! Drop us a line and we’ll get back to you 😻