Car finance explained

Car finance explained

Car finance is a way of paying for a car over time, rather than paying for it all in one go. There are many different types of car finance available, so its important to know about them and how they work. That way, you can decide which option is best for you before you get a quote.

How does online car finance work?

Car finance allows you to spread the cost of buying a car over a chosen payback period. Whether you’re buying a new or used car, it’s a great way to get yourself a set of wheels without needing to save up a large sum of money up front. It is usually spread over a 24-60 month period, with an arrangement of making repayments, usually every month.

Please note that we only provide a Conditional Sale agreement for car, van and motorbike finance.

Car finance eligibility

There are many factors to consider when seeing if you’re eligible for car finance, including: 

  • Your age
  • Credit score
  • Affordability

Your eligibility for car finance will be different to other people because its based on many personal factors. We use a soft credit check at the point of application. You might have heard of lenders offering no credit check car finance – this doesn’t exist. For more information you can see our guide that explains why no credit check car finance is a myth.

You might be worried that you can’t get car finance because of a poor credit history, or if you’ve been rejected by other lenders. We’re bad credit car finance specialists, even if you have a CCJ or IVA we might be able to help.

We offer vehicle finance across the whole of the UK, including Northern Ireland, so we could help get car finance near you.

How much will car finance cost?

It’s important to fully understand the terms and conditions and all of the costs involved before you sign a car finance agreement, including what we mean by APR. One way for you to lower your monthly repayments is by putting a deposit down on the car, which lowers the total amount of finance that you borrow. A car deposit can help make your finance agreement more affordable and ensure that you can get a car that suits your needs.

No deposit car finance is when you haven’t got a cash deposit or you may prefer not to put a deposit down. Whether or not you need to put down a deposit is based on certain individual factors.

The payments you make during your finance agreement can depend on several factors, including the amount you’re looking to borrow, the length of your agreement, and the type of agreement you have. In most cases, the longer the amount of time, the lower the monthly repayments. Choose a length of time that works for you based on what repayments you can afford. You could try using our car finance calculator to get an idea of what those monthly repayments might look like.

Car finance is a way of paying for a car over time, rather than paying for it all in one go. There are many different types of car finance available, so its important to know about them and how they work. That way, you can decide which option is best for you before you get a quote.

How does online car finance work?

Car finance allows you to spread the cost of buying a car over a chosen payback period. Whether you’re buying a new or used car, it’s a great way to get yourself a set of wheels without needing to save up a large sum of money up front. It is usually spread over a 24-60 month period, with an arrangement of making repayments, usually every month.

Please note that we only provide a Conditional Sale agreement for car, van and motorbike finance.

Car finance eligibility

There are many factors to consider when seeing if you’re eligible for car finance, including: 

  • Your age
  • Credit score
  • Affordability

Your eligibility for car finance will be different to other people because its based on many personal factors. We use a soft credit check at the point of application. You might have heard of lenders offering no credit check car finance – this doesn’t exist. For more information you can see our guide that explains why no credit check car finance is a myth.

You might be worried that you can’t get car finance because of a poor credit history, or if you’ve been rejected by other lenders. We’re bad credit car finance specialists, even if you have a CCJ or IVA we might be able to help.

We offer vehicle finance across the whole of the UK, including Northern Ireland, so we could help get car finance near you.

How much will car finance cost?

It’s important to fully understand the terms and conditions and all of the costs involved before you sign a car finance agreement, including what we mean by APR. One way for you to lower your monthly repayments is by putting a deposit down on the car, which lowers the total amount of finance that you borrow. A car deposit can help make your finance agreement more affordable and ensure that you can get a car that suits your needs.

No deposit car finance is when you haven’t got a cash deposit or you may prefer not to put a deposit down. Whether or not you need to put down a deposit is based on certain individual factors.

The payments you make during your finance agreement can depend on several factors, including the amount you’re looking to borrow, the length of your agreement, and the type of agreement you have. In most cases, the longer the amount of time, the lower the monthly repayments. Choose a length of time that works for you based on what repayments you can afford. You could try using our car finance calculator to get an idea of what those monthly repayments might look like.

What your car loan could look like

Summary

  • Monthly payment: £000.00
  • Total to repay: £00,000.00
  • Calculated APR: 00.0%

Representative 31.9% APR

What your car loan could look like

  • Monthly payment: £000.00
  • Total to repay: £00,000.00
  • Calculated APR: 00.0%

Representative 31.9% APR

Car finance options

When it comes to car finance, there are lots of different types available. It’s important to understand your options and how they differ so you can find one suited to you. Some of the most common types of car finance are:

  • Conditional Sale (CS)
  • Hire Purchase (HP)
  • Personal Contract Purchase (PCP)
  • Personal Loan
  • Car Leasing, also known as Personal Contract Hire (PCH)

What is Conditional Sale?

Car finance options

When it comes to car finance, there are lots of different types available. It’s important to understand your options and how they differ so you can find one suited to you. Some of the most common types of car finance are:

  • Conditional Sale (CS)
  • Hire Purchase (HP)
  • Personal Contract Purchase (PCP)
  • Personal Loan
  • Car Leasing, also known as Personal Contract Hire (PCH)

What is Conditional Sale?

We use a Conditional Sale agreement for car finance. Conditional Sale (CS) means that you will have full use of the vehicle for the term of the agreement, and it will be registered in your name. You won’t fully own the car until all repayments are made.

Advantages of Conditional Sale:

  • You won’t pay a large sum up front, or at the end of the agreement
  • Payments are fixed for the duration of the agreement
  • You don’t need to pay an ‘option to purchase’ fee to own the car at the end of the agreement
  • You can decide to hand the car back once you’ve paid back half the repayable amount, if you opt for voluntary termination

Disadvantages of Conditional Sale:

  • The agreement is secured against the car, so if you don’t meet your monthly repayments, your car could be repossessed
  • Monthly repayments can sometimes be higher in comparison to other finance options
Conditional Sale car diagram

Once all monthly payments have been made you will own the car.

We use a Conditional Sale agreement for car finance. Conditional Sale (CS) means that you will have full use of the vehicle for the term of the agreement, and it will be registered in your name. You won’t fully own the car until all repayments are made.

Conditional Sale car diagram

Once all monthly payments have been made you will own the car.

Advantages of Conditional Sale:

  • You won’t pay a large sum up front, or at the end of the agreement
  • Payments are fixed for the duration of the agreement
  • You don’t need to pay an ‘option to purchase’ fee to own the car at the end of the agreement
  • You can decide to hand the car back once you’ve paid back half the repayable amount, if you opt for voluntary termination

Disadvantages of Conditional Sale:

  • The agreement is secured against the car, so if you don’t meet your monthly repayments, your car could be repossessed
  • Monthly repayments can sometimes be higher in comparison to other finance options

What is Hire Purchase?

Hire Purchase (HP) is when you essentially hire the car from the lender until its been paid for in full. You can then pay a final fee which is referred to as the ‘option to purchase’ fee to own the car outright. This cost can vary but it is usually around £100-£200. You’ll officially own the car once all repayments are made and you’ve paid the option to purchase fee.

Advantages of Hire Purchase:

  • You won’t pay a large sum up front, or at the end of the agreement
  • Payments are fixed for the duration of the agreement
  • You can decide to hand the car back once you’ve paid half the repayable amount, if you opt for voluntary termination

Disadvantages of Hire Purchase:

  • The agreement is secured against the car, so if you don’t meet your monthly repayments, you car could be repossessed
  • Monthly repayments can sometimes be higher in comparison to other finance options

What is Personal Contract Purchase?

Personal Contract Purchase (PCP) is when you pay a small deposit and take out a loan to cover the depreciation of the car. You then make monthly repayments over the agreed term. At the end, you’ll have the option to trade in the car and start a PCP plan on a new car, give the car back to the dealer, or make one final payment (the balloon payment) to keep the car.

Advantages of Personal Contract Purchase:

  • You have the flexibility at the end of the agreement to decide what to do with the car
  • The monthly repayments tend to be lower than other finance options

Disadvantages of Personal Contract Purchase:

  • There might be a maximum mileage limit, and you could be charged if you exceed it
  • You’ll need to pay interest on the Guaranteed Minimum Future Value even if you do not keep the car at the end of the agreement
  • If you decide to return the car at the end of the agreement, you may be charged if there is wear and tear or damage

What is a Personal Loan?

A Personal Loan is when you borrow an amount of money from a bank or other finance provider, which you can then use to purchase a car.

Advantages of a Personal Loan:

  • You’ll own the car as soon as the dealer receives the money for it
  • You can use a personal loan to buy a car from any dealer or private seller

Disadvantages of a Personal Loan:

  • If you have bad credit, you might find it tough to get accepted for a personal loan
  • You may not get vehicle checks included, which you might usually receive with other finance options

What is Car Leasing?

Car leasing, also known as Personal Contract Hire (PCH), is when you hire a car for an agreed period of time before returning it at the end of the lease term. In a typical lease agreement, you’ll pay a deposit or initial payment followed by fixed payments over an agreed period of time.

Advantages of Car Leasing:

  • You won’t have to worry about the depreciation in value of the car as you do not own it
  • It gives you the flexibility if you like to change cars often
  • Leasing usually includes servicing and maintenance costs

Disadvantages of Car Leasing:

  • You might have to pay a large up front deposit
  • The monthly costs tend to be higher than other finance options because servicing and maintenance might be included
  • If you no longer want the car, or can’t keep up with the payments, you’ll have to pay a cancellation fee
  • You never officially own the car

Why get car finance with Moneybarn?

Financing a car with Moneybarn means you are getting the support you need to live your life to the fullest. If you’re wanting to build your credit score or if your credit history isn’t perfect, then we want to help. We’re here for every step of your journey.

What is Hire Purchase?

Hire Purchase (HP) is when you essentially hire the car from the lender until its been paid for in full. You can then pay a final fee which is referred to as the ‘option to purchase’ fee to own the car outright. This cost can vary but it is usually around £100-£200. You’ll officially own the car once all repayments are made and you’ve paid the option to purchase fee.

Advantages of Hire Purchase:

  • You won’t pay a large sum up front, or at the end of the agreement
  • Payments are fixed for the duration of the agreement
  • You can decide to hand the car back once you’ve paid half the repayable amount, if you opt for voluntary termination

Disadvantages of Hire Purchase:

  • The agreement is secured against the car, so if you don’t meet your monthly repayments, you car could be repossessed
  • Monthly repayments can sometimes be higher in comparison to other finance options

What is Personal Contract Purchase?

Personal Contract Purchase (PCP) is when you pay a small deposit and take out a loan to cover the depreciation of the car. You then make monthly repayments over the agreed term. At the end, you’ll have the option to trade in the car and start a PCP plan on a new car, give the car back to the dealer, or make one final payment (the balloon payment) to keep the car.

Advantages of Personal Contract Purchase:

  • You have the flexibility at the end of the agreement to decide what to do with the car
  • The monthly repayments tend to be lower than other finance options

Disadvantages of Personal Contract Purchase:

  • There might be a maximum mileage limit, and you could be charged if you exceed it
  • You’ll need to pay interest on the Guaranteed Minimum Future Value even if you do not keep the car at the end of the agreement
  • If you decide to return the car at the end of the agreement, you may be charged if there is wear and tear or damage

What is a Personal Loan?

A Personal Loan is when you borrow an amount of money from a bank or other finance provider, which you can then use to purchase a car.

Advantages of a Personal Loan:

  • You’ll own the car as soon as the dealer receives the money for it
  • You can use a personal loan to buy a car from any dealer or private seller

Disadvantages of a Personal Loan:

  • If you have bad credit, you might find it tough to get accepted for a personal loan
  • You may not get vehicle checks included, which you might usually receive with other finance options

What is Car Leasing?

Car leasing, also known as Personal Contract Hire (PCH), is when you hire a car for an agreed period of time before returning it at the end of the lease term. In a typical lease agreement, you’ll pay a deposit or initial payment followed by fixed payments over an agreed period of time.

Advantages of Car Leasing:

  • You won’t have to worry about the depreciation in value of the car as you do not own it
  • It gives you the flexibility if you like to change cars often
  • Leasing usually includes servicing and maintenance costs

Disadvantages of Car Leasing:

  • You might have to pay a large up front deposit
  • The monthly costs tend to be higher than other finance options because servicing and maintenance might be included
  • If you no longer want the car, or can’t keep up with the payments, you’ll have to pay a cancellation fee
  • You never officially own the car

Why get car finance with Moneybarn?

Financing a car with Moneybarn means you are getting the support you need to live your life to the fullest. If you’re wanting to build your credit score or if your credit history isn’t perfect, then we want to help. We’re here for every step of your journey.

We only use a soft search at application, which means it won’t affect your credit score. As a vehicle finance company who want to help all their customers onto a better road ahead, we accept applications when other lenders might not. 

  • Specialise in poor credit
  • We accept IVAs
  • We accept CCJs

We understand the importance of having a reliable car whether it’s getting to work, doing the school run or going about your daily lives. Our broad finance option should help you find the right car for you.

  • Financing a car from £4,000 – £25,000
  • Maximum of 120,000 mileage on the vehicle
  • No older than 15 years at the end of the agreement

We only use a soft search at application, which means it won’t affect your credit score. As a vehicle finance company who want to help all their customers onto a better road ahead, we accept applications when other lenders might not. 

  • Specialise in poor credit
  • We accept IVAs
  • We accept CCJs

We understand the importance of having a reliable car whether it’s getting to work, doing the school run or going about your daily lives. Our broad finance option should help you find the right car for you.

  • Financing a car from £4,000 – £25,000
  • Maximum of 120,000 mileage on the vehicle
  • No older than 15 years at the end of the agreement

Improve your credit score

We’ve written a guide that explains how long it takes to improve your credit score, as well as a number of handy tips that might boost your score.

Increase your chances of getting finance

Applying for car finance can feel daunting. But there are some things you can do that might help your chances. Find out in our guide.

Our application process

It is important to completely understand the car finance agreement that you may be entering – find out more about how a conditional sale agreement works.