What is buying a car on Finance?

If you are looking to buy a new car but don’t have the money upfront, financing is a simple way to buy and spread the cost over the months.

Rather than purchase a car with savings or other funds the customer already has, the customer borrows the money from a finance lender and pays it back in monthly re-payments.
There are three main types of finance:

1. Personal Contract Purchase (PCP)

This is a flexible finance option with fixed monthly payments. Once the contract ends, the customer has the option to buy the car by making the optional final payment or they can trade it for a newer car. The customer will need a good credit score for this option as the car is not fully theirs until they decide to buy it at the end or not.  The customer should make sure they can afford the monthly payments to prevent falling behind on payments.

2. Hire Purchase (HP)

This spreads the cost of a new or used car over monthly payments. After the monthly payments have been paid, the customer owns the car. There is no optional final payment at the end however the monthly payments are slightly larger than the PCP option but interest rates are not as high. This is a good option if the customer wants to own the car as well as not in a rush to upgrade to a newer car.

3. Leasing also known as personal contract hire (PCH)

As said in one of our other articles, leasing is like a long- term rental agreement. The customer does not own the car at the end of the agreement and simply pays a low monthly cost over 2-4 years. Small fees can occur if the car becomes damaged and if the car exceeds the set mileage.

One thing the customer needs to consider is checking their credit score. Some lenders can be strict with who they accept on finance so it is worth the customer looking at their credit score as well as working out how much they have for a good deposit and work out their outgongs for each month to see if they can afford the monthly payments.


Often the car manufacturer will offer incentives to borrow from them, such as interest free, low rates or interest or dealer deposit contributions which is worth discussing with the salesperson. Ford have offers on all of the time to help support people who choose to finance with them which includes 0% APR finance and upgrade offers to help the customer buy a new car against their old car.

What is buying a car on Finance?
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