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The Future of Car Finance

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Rates from as low as 6.9% APR, Representative 14.8% APR

Car finance with Carmoola

Looking for information about car finance? You've come to the right place!

Financing a used car used to be super painful… until Carmoola came along! But you’re probably here looking to answer some questions about car finance right? Well, you’ve come to the right place so let’s get started!

1. The Different Types of Car Finance

There are several ways you can spread the cost of a car, but some of the most common are:

  1. A hire purchase agreement (HP)
  2. A personal contract purchase agreement (PCP)
  3. A personal loan, usually from your bank

It can be confusing whether you should call it car finance or car loan, but really these things are the same! In any of the 3 cases above, you’ll be borrowing an amount of money, and repaying it to the lender over a period of time, plus some interest. The main difference between these options is that PCP or HP car finance is a secured loan against the vehicle, whereas a personal loan is usually unsecured.

Need to go back to basics? Check out our guide to car finance and loans here or check out our handy video here 👇


1a. Hire Purchase (HP)

HP is a car finance plan that helps you to spread the cost of your next car by making monthly payments over an agreed length of time. You’re likely to pay higher monthly payments than a Personal Contract Purchase (PCP) agreement, but when you come to the end of the agreement you’ll own the car outright. Often, there are no annual mileage limits to worry about, so you can drive as much as you like!

A common misconception with HP car finance is that you cannot get 0 deposit car finance on a Hire Purchase agreement - but this is incorrect! Carmoola is one of the lenders who will allow you to take a Hire Purchase agreement with 0 deposit, provided the value of the vehicle is as expected.

A Hire Purchase agreement could be perfect for you if you’re keen to keep the car at the end of the term.

Hire-Purchase-cars The features of Hire Purchase agreements

The key features of Hire Purchase are:

  • Fixed contract length, usually between 2 and 5 years
  • Even monthly repayments for the duration of your loan
  • Start your loan with, or without an upfront deposit
  • Own the car outright, once all the repayments have been made

1b. Personal Contract Purchase (PCP)

PCP is a type of car finance plan enabling you to make affordable monthly payments over an agreed contract length, with a larger (optional) final ‘balloon’ payment due at the end. The balloon payment is only due if you want to buy the car outright. At the end of the contract, you’ll have three options to choose from. Option 1 is to hand the car back to the finance company (it needs to be in good condition and you’ll need to have kept under the agreed mileage, otherwise there may be additional fees to pay). Option 2 is to part-exchange it for another car, and start a new agreement for that car (subject to status). Option 3 is to pay the final balloon payment, and you’ll own the car outright.

Personal Contract Cars The features of PCP agreements

The key features of PCP

  • Fixed contract length, usually between 2 and 5 years
  • Even monthly repayments for the duration of your agreement
  • You'll almost always need to pay a deposit
  • Your final payment will be a large "balloon payment" (or lump sum), and you can choose to pay this if you want to keep the car. If not, you can give the car back.

PCP might be best for you if you’re thinking of changing your car every couple of years, or if you’re unsure about whether you’ll want to buy the car at the end of the term or not. Carmoola does not currently offer PCP.

Did you know? PCP monthly payments can often be more affordable than HP monthly payments. The reason for this is that a large part of the total amount payable on the PCP agreement is left to the end. However, you’ll also pay interest on the value of the car at the end of the contract, which means that PCP can be more costly overall, than HP.

When comparing finance options, make sure to review the representative APR. Often, PCP may sound cheaper, but the representative APR is higher and so it's costing you more to borrow the money. 

1c. Personal Loans

Another option that can work well for customers who have an incredibly high credit rating is to take a personal loan. These loans are often unsecured, and may be available through your bank. When applying for a personal loan, you don't need to share details about the car you're buying. You'll get a finance offer from your bank based on what they believe you can afford to borrow, and comfortably repay. Carmoola does not offer personal loans.

Thinking about car finance on your next car? Be a smart cookie and read more about all things car finance before you get started. 


2. Types of Cars and Finance Carmoola Offers 🤗

Lucky for you, you've got options! With Carmoola there are lots of different types of cars you can get on finance. Currently we offer:

  • Electric car finance ⚡️
  • Hybrid car finance 🔋
  • Automatic car finance 🚙
  • Manual car finance 🕹
  • New car finance ✨
  • Diesel car finance (Euro 6 and above) 🚘
  • Petrol car finance (Euro 5 and above) 🚗 
  • Used or second hand car finance 🥈
  • Zero deposit car finance 👌
  • No cars with over 100,000 miles 🕰

Coming soon

Thinking of going green? 🌳

And to top it all off, if you're looking for electric car finance deals, you've come to the right place! In the coming weeks, Carmoola is introducing an exclusive green discount for any customer who buys an electric a car with Carmoola 🌳

The thing to remember about Carmoola is that we offer used car finance in the UK, but currently we can't help customers buy a brand new car.

In the meantime, why not check out our Guide to Electric and Hybrid Car Finance?

3. Can I Get Car Finance?

We know it can be a daunting process, wondering "will I get accepted for car finance?", or "am i eligible for car finance?" but actually we've made the process with Carmoola so simple, you can find out the answer to this question in just 60 seconds. To find out if you're eligible, you'll need to do a couple of things:

Answer a few questions so we can understand your credit history and how much you can afford to borrow (takes 60 seconds and you'll get an instant decision, and if approved, a budget for your car)

Take a quick snap of your driving licence and a short selfie to prove your identity

Add the details of the car you want to buy so we can run a free car history check

It really is that easy! And if you're wondering about which documents you need to get finance, it's another easy answer. With Carmoola, you'll just need your driving licence 🙌

Got more questions about how difficult it is to get car finance in your situation? We've put together all the questions we get asked about car finance eligibility in a handle article here. Everything from "Can I Get Car Finance if I'm Self Employed?" to "Can Pensioners Get Car Finance?".

4. How Do I Calculate What I Can Afford to Spend on My Car? 💸

This can be a tricky one, but we've got some tips for you to try out! Yes, you can play around with our free car finance and loans calculator, but this won't tell you how much you can afford to spend. You'll need to think about your monthly affordability. Here's some steps you can take to work it out and get an idea of what you can afford to spend on car finance. Pro tip: Get a pen and paper 📝

Step 1: Your monthly income

How much do you earn each month? Is it a regular amount? If not, try to average out the past 6 months. Write it down at the top!

Step 2: Your monthly outgoings

How much do you spend each month? Let's think about these ones, in terms of what you personally pay each month (we know you might share costs with your partner or housemates, but car finance is for you individually).

  • Housing (i.e. rent or mortgage)
  • Utilities and other bills (i.e. council tax, gas, electricity, water, home insurance, broadband, TV, mobile phone)
  • Food
  • Childcare
  • Commuting and car costs (i.e. commuting costs, car insurance, MOT, servicing, road tax)
  • Your monthly credit commitments (i.e. loans, credit cards)

Step 3: Calculate your monthly disposable income

Now you've got your monthly income and monthly spend, you can deduct the spend from the income to see roughly what your monthly disposable income might be. For example, if you earn £1,500 per month, and you spend £1,000 per month, your disposable income would be £500.

But wait!! Before you get excited and think you can spend £500 per month on a car, THINK AGAIN. Remember those gorgeous shoes you saw recently? The dinner you've got booked in a few weeks? The new furnishings you need to buy for your place? Those things come out of your monthly disposable income too. Build yourself a little buffer so that you can keep living your life as you would normally, even with your new car finance in place. For example, we might decide that a £200 per month buffer is good (and gives some wriggle room for the ever increasing energy prices!), which leaves us in this example with a £300 monthly budget.

Step 4: Investigate your credit history

There's loads of free tools out there where you can find out more about your credit score. We really like Credit Karma, as they also give you cool tips on how to improve your credit score! If you're not familiar, you can start to get up close and personal with your score, and this could help you understand what sort of rate you might be offered by car finance companies.

Step 5: Calculator time!

Head over to our handy hire purchase car finance calculator to see what sort of budget you could be working with, and how much it might cost to finance a used car. Don't forget, you may have some savings or an old car to part-exchange as part of the purchase.

Step 6: Get an accurate budget on Carmoola

If you're keen to upgrade your ride, then you may want to get a budget for real! It takes 60 seconds in the app, and there's no paperwork or faff to worry about.

Affordability calculator

Calculate your disposable income


This is the amount you get paid into your account each month

How much do you spend each month on...


Hit calculate to see your estimated monthly disposable income


Now that you know what you can afford, use our car finance calculator to see how much you can spend on your car

The use of this Affordability Calculator to determine your disposable income is not a guarantee of the availability of credit facilities from Carmoola

Grab your budget for real in the Carmoola app

Pay for your car with a plan that suits you.

Hit the Road with Carmoola

Representative 14.8% APR

Hit the road with Carmoola

5. Car Finance Jargon Busters 💥

Confusing your APRs with your Admin Fees? Your Part-Exchange with your PCPs? Well, look no further, friend. We're cruising through the noise and making sure to give you a solid explanation of what all these terms mean 👊

Kick it straight into 5th gear, because after reading Car Finance Jargon Explained you'll be ready to drive off happy in your new ride.

6. How Do I Apply For Car Finance in the UK? 🇬🇧

The coolest thing about Carmoola, is that you can apply for car finance online. And although many other lenders and brokers may claim they are online - they all require you to have phone conversations and follow up with paperwork which means it can take DAYS to get your car finance sorted and complete the process. Once you've downloaded the Carmoola app for car finance, you can apply and get an instant decision online in just 60 seconds. No waiting around, no paperwork, no negative impact on your credit rating. It's free and simple to find out how much you can spend on your next car.

Here's some guides we think you might find super useful 👇

💪 Everything You Need to Know When You Apply For Car Finance

🇬🇧 UK Car Finance: Everything You Need to Know

💻 How to Get Car Finance Online

7. What Credit Score Do I Need to Get Car Finance? 💳

If you're wondering "will applying for car finance affect my credit rating?", then we're glad you landed here. Some lenders (like Carmoola) will only run a soft credit search in order for you to get a quote and see how much you can borrow. However, you need to watch out for lenders who run a hard credit search. A hard search leaves a mark on your credit profile. Some lenders see multiple "hard" searches as a negative indicator, and this may be reflected in the rate you are offered, or the likelihood of you being offered finance at all.

In terms of what credit score is needed to finance a car, this will differ from one lender to another, and there are other factors that go into the decision of whether to lend to you or not. If you aren't too familiar with your credit score, why not check out one of the free tools such as Credit Karma, where you can learn about your score, what's affecting it, and how to improve it. After all, the better your score, the cheaper it will be for you to borrow money, as you could be offered a better rate 🥳 We don't know of many lenders who would offer car finance without a credit check, so improving your score is always a useful thing to do.

Before you start applying for car finance, we always recommend you read about car finance and credit scores so you can make sure to get the best deal possible!

8. Are There Any Restrictions for Car Finance? ❌

Interesting you should ask! With most car finance providers and companies, there are some limits as to what you can do with the car, if you've got an active car finance agreement. There are also often some restrictions about the types of cars you can get on finance. Here's some FAQs and answers for you 💪

"Can I finance a car with over 100k miles on the clock?"

Usually, the higher the mileage, the less likely it is that the finance company will be prepared to lend on the car. With Carmoola, our cut off is 100,000 miles. The main reason for this is to protect customers. At this sort of mileage, cars may have more (expensive) problems and need more extensive repairs, and this can put a strain on a customer's financial situation.

"Can you modify a financed car?"

The answer here may depend on exactly what you want to modify about the car, and restrictions can differ from one lender to another. You can read more about modifying a financed car here.

"Can you transfer car finance to another person or car?"

Whilst this may seem like a simple task, there was a lot of thought and careful consideration that went into the approval process with your car finance lender. They needed to assess you, verify your identity, your creditworthiness and affordability. They also assessed the vehicle you wanted to buy and the loan was secured against this vehicle. For these reasons, it's not usually possible to transfer your finance agreement to another car or person.

9. Where Can I Find the Best Deals on Car Finance? 🤝

When looking for your new wheels, it can be helpful to get your car finance sorted in advance. If you set your heart on an unaffordable car, and then try to work out how to pay for it, you may find that you're overstretching yourself and committing to more than you can comfortably afford. Last minute finance deals can also result in you not getting the best interest rate, as you've not had time to shop around.

The best way to finance a car is to see what you can afford to spend BEFORE you start searching, you'll make sure to stick within your budget. A great way to do this is to download the Carmoola app, where you can find out your budget in advance, and then have the certainty to search for a great car within your budget. Also, if you're looking for the best electric car finance deals, you may want to check out Carmoola to see if you can benefit from our green discounts... more info on this coming soon!

Another option for some customers is zero deposit car finance deals, which may help you to spread the cost of your next car without having any savings. Carmoola does offer zero deposit deals, so check out the app to see if we can help you buy your next ride!