How to Pick the Right Car Finance Deal

Car finance sounds like an abundance of confusing jargons, acronyms and terms you have never heard of before. While applying for car finance seems straightforward in most cases, people often forget that there’s numerous different type of car finance, thus the one you hope to be accepted for might not be the one that suits your budget completely. Here are a few tips to consider before thinking about what car finance deal to go for!

Set a Reasonable Budget

First and foremost, a budget is vital and is the most important part of car finance. Not only does it help you negotiate a limit as to how much you want to spend on your new car, but it also marks the line should you pick a deal that takes you above more than you can afford to pay each month. Think very carefully as you don’t want to end up setting yourself a budget that is too expensive or not quite enough for you to pay for your car.

Consider Your Type of Lifestyle

Living a quiet, low-budget lifestyle is completely different to living one that involves looking after children, caring for other people or even covering more bills than you can count every month, therefore your finance options would be very different. In most cases, the fewer unnecessary expenses you sign yourself up to cover each month, the better the chance you have of landing a more flexible car finance deal, while if you have a mountain of bills to pay, you might land yourself a deal with more restrictions than others.


Personal Contract Purchase (PCP) is the type of car finance you would land if you could only afford to make small monthly instalments to repay the cost of the car you buy. Essentially, if you have more expenses to cover, excluding the cost of finance, you would be pushed to apply for a PCP finance deal rather than a HP type. While you might have to pay a larger deposit fee with several low-cost monthly amounts, you can either trade the car in for another or make the final payment and keep the car in the end. PCP is fair and flexible, but there are consequently more restrictions with this type of car finance deal.


On the other hand, Hire Purchase is a way of buying a car on finance, but the loan is secured against the car and you are required to pay a deposit of around 10 per cent of the car’s value, along with a set of monthly instalments over an agreed period. With this type of finance deal, you are not the legal owner of the car until the very last payment has been made, however, it is much quicker and easier to arrange than most other types of car finance.

Make Sure You Can Afford the Payments

Regardless of the type of finance you are considering or that you have been accepted for, before you go ahead and sign the deal, make sure you can afford to cover all the payments and that you will be able to make them on time. If you aren’t 100 per cent certain you will be able to make every payment on time, then you should consider asking for a guarantor to co-sign your finance contract, that way, the finance lender knows that you will make the payments and that you won’t let them down – the guarantor must have a good credit score to be approved.

Full time and dedicated blogger who loves to read and write everything about newest cars, exploring and hence, love to ride old classic cars!

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