Comparing the Best Car Finance Companies

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Tip: : Don't just compare APRs. Look at the total amount payable over the entire loan term to truly understand the cost of different finance options.

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Are you in the market for a new car but unsure about the best way to finance it? With numerous car finance companies to choose from, it can be challenging to find the right one that suits your needs.

When searching for car finance, it's essential to consider factors such as the type of loan, interest rates, repayment terms, and your credit history. Whether you have a good credit score or a poor credit history, there are options available to help you secure the right car loan for your needs.

What Are the Different Types of Car Finance Options?

Before exploring the best car finance companies, let's clarify the different types of car finance available:

  1. Personal Contract Purchase (PCP): With PCP, you pay a deposit and monthly instalments for a fixed term. At the end of the agreement, you can either return the car, make a final payment to own it, or trade it in for your next vehicle. PCP often comes with mileage restrictions, so be sure to consider your driving habits before choosing this option.
  2. Hire Purchase (HP): HP allows you to spread the cost of the car over a fixed term. Once you've made all the payments, you own the car outright. This type of loan is secured against the vehicle, meaning the lender can repossess the car if you fail to make payments.
  3. Personal Loan: You can take out an unsecured personal loan to cover the cost of the car. You'll own the car from the start and repay the loan in fixed monthly repayments. Interest rates may be higher compared to secured loans, but you'll have more flexibility and won't face mileage restrictions.

Did you know: Some finance companies offer 'multi-car' discounts if you're financing more than one vehicle. This could be useful for families or small businesses.

Who Are the Top Car Finance Companies in the UK?

1. Zuto

Zuto is a popular car finance broker that works with a panel of lenders to find the best deal for you. They offer a fast and easy application process, with decisions made in minutes. Zuto considers all credit histories, so even if you have bad credit history, they may be able to help. Their smart search tool performs a soft search on your credit file, allowing you to see your options without affecting your credit score.

2. CarFinance 247

CarFinance 247 is another leading car finance broker, offering a wide range of finance options, including PCP, HP, and personal loans. They work with a variety of lenders and have a high acceptance rate, even for those with less-than-perfect credit scores. CarFinance 247 also offers a smart search tool to help you find the best deals without impacting your credit rating.

Who Are the Top Car Finance Companies in the UK

3. Moneybarn

Moneybarn specialises in car finance for people with poor credit. They offer competitive rates and a simple application process, with decisions made within 24 hours. Moneybarn provides both HP and PCP options, tailored to help those with bad credit secure the car they need.

Santander Consumer Finance

4. Santander Consumer Finance

Santander Consumer Finance is a direct lender offering PCP and HP finance options. They have competitive interest rates and a straightforward application process. Santander conducts a thorough financial assessment to ensure affordability and offers a range of repayment terms to suit your longer term car finance needs.

5. Black Horse

Black Horse is part of the Lloyds Banking Group and offers PCP, HP, and personal loan options. They have a wide network of dealerships across England and a user-friendly online application process. Black Horse considers all credit profiles and offers competitive APR rates, making them a popular choice for car finance.

Remember: While big names are well-known, smaller, specialist lenders might offer more competitive rates or better service for your specific situation.

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What Factors Should I Consider When Comparing Car Finance Deals?

When comparing car finance deals, there are several factors to consider:

  • Representative APR: This is the interest rate offered to at least 51% of successful applicants. Remember that the rate you're offered may differ based on your individual circumstances. A lower interest rate can save you money over the course of your loan.
  • Loan term: A longer loan term means lower monthly repayments but more interest paid overall. Choose a term that balances affordability with the total cost of borrowing. Be sure to consider your budget and future financial plans when deciding on the right loan term for you.
  • Deposit: A larger deposit can lower your monthly payments and total interest paid. However, make sure you can afford the upfront cost. Some lenders may offer no deposit options, but this will likely result in higher monthly repayments.
  • Credit check: Most car finance companies will conduct a credit check. Those with higher credit scores generally qualify for better rates. If you have a poor credit history, don't worry – there are still options available, such as bad credit loans or lenders who specialise in helping those with less-than-perfect credit.
  • Early repayment fees: Check if there are any penalties for settling your loan early, as this can affect your flexibility. If you think you may want to pay off your loan ahead of schedule, look for deals with low or no early repayment fees.

Tip: : Check if the finance company reports to credit reference agencies. Timely payments on a reported loan can help improve your credit score.

Is Car Finance Better Than a Personal Loan?

When financing a car, you may wonder whether to choose car finance or a personal loan (unsecured loan). Car finance options like PCP and HP are secured against the vehicle, meaning the lender can repossess the car if you fail to make payments. Personal loans are unsecured and often have higher interest rates, but you'll own the car outright from the start.

Ultimately, the best option depends on your individual circumstances and preferences. Look at factors such as the total cost of borrowing, monthly affordability, whether you want to own the car at the end of the term and pros and cons.

Is Car Finance Better Than a Personal Loan

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Various finance options cater to different financial circumstances, and researching these options can help find the best deal.

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How Do I Choose the Right Car Finance Company for Me?

When choosing a car finance company, there are several key factors to consider:

  1. Reputation: Look for a company with a solid reputation and positive customer reviews. Check online forums and review sites to get an idea of other people's experiences. You can also ask friends, family, or colleagues for recommendations.
  2. Flexibility: Choose a provider that offers flexible finance options to suit your needs. This could include different loan terms, deposit amounts, and the ability to make overpayments or settle early without penalties. The more flexible the lender, the easier it will be to find a deal that works for you.
  3. Interest rates: Compare the representative APR from different providers to find the most competitive rates. Remember that the rate you're offered may depend on your credit score and individual circumstances. Don't be afraid to negotiate with lenders to see if they can offer you a better rate.
  4. Customer service: Good customer service is essential, particularly if you have questions or issues during the application process or loan term. Look for a company with a responsive and helpful customer support team. Check if they have multiple contact options, such as phone, email, or live chat.
  5. Eligibility criteria: Check the lender's eligibility criteria before applying, as this can save you time and avoid unnecessary credit checks. Most companies will have a minimum age, income, and credit score requirement. Some may also have specific criteria for the type of car you can finance, such as its age or mileage.

Did you know: Some car finance companies offer a price promise or price match service. This can be a useful negotiating tool when finalising your deal.

What Are Some Tips for Getting the Best Car Finance Deal

What Are Some Tips for Getting the Best Car Finance Deal?

  1. Check your credit score: Before applying for car finance, check your credit report for any errors or areas for improvement. A higher credit score can help you secure better rates and terms. You can access your credit report for free through various online providers.
  2. Save a larger deposit: Putting down a larger deposit can lower your monthly payments and total interest paid over the loan term. Aim to save as much as you can afford upfront. This will also demonstrate to lenders that you are financially responsible and committed to the purchase.
  3. Choose a shorter loan term: While a longer loan term may mean lower monthly payments, you'll pay more in interest overall. Opting for a shorter term can save you money in the long run, provided you can afford the higher monthly instalments. Just be sure to balance your budget with your desire to pay off the loan quickly.
  4. Shop around: Don't settle for the first car finance deal you come across. Compare offers from multiple providers to find the most competitive rates and terms for your circumstances. This may take some time, but it's worth it to ensure you're getting the best possible deal.
  5. Read the small print: Before signing any car finance agreement, make sure you fully understand the terms and conditions. Check for hidden fees, early repayment penalties, and any other clauses that could affect you down the line. If you're unsure about anything, don't hesitate to ask questions or seek independent advice.

Car Finance Company Comparison

Company Finance Options Representative APR Loan Term Credit Check
Zuto PCP, HP, Loan 7.9% - 29.9% 2 - 5 years Soft Search
CarFinance 247 PCP, HP, Loan 6.9% - 27.9% 2 - 5 years Soft Search
Moneybarn HP, PCP 12.9% - 49.9% 2 - 5 years Yes
Santander Consumer Finance PCP, HP 4.9% - 29.9% 1 - 5 years Yes
Black Horse PCP, HP, Loan 3.9% - 19.9% 1 - 5 years Yes

Sources : Financial Conduct Authority, Money Advice Service, StepChange

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Our Car Expert Comments:

"When financing your dream car, look at all options to find the best fit for your needs and budget. PCP is fantastic if you enjoy driving the latest models and want flexibility. For those with less-than-perfect credit but can manage monthly payments, HP offers a path to ownership. However, with a strong credit score and competitive interest rate, a car loan may be the most cost-effective. Consider your deposit, monthly budget, and long-term goals to navigate car finance with confidence and drive away with the best deal."

Charlotte Yates
Charlotte Yates

Personal finance content expert

Frequently Asked Questions

Yes, many car finance companies specialise in helping people with bad credit. However, you may face higher interest rates and less favourable terms. It's important to shop around and compare deals to find the best option for your circumstances.

With PCP, you have the option to return the car or make a final payment to own it at the end of the term. HP involves paying off the total cost of the car over the agreed term, after which you own it outright. PCP often comes with mileage restrictions and lower monthly payments, while HP gives you full ownership of the car at the end of the term.

Check your credit score and address any issues, save a larger deposit, and choose a less expensive car to improve your chances of approval. You can also consider applying with a co-signer or guarantor who has a strong credit history.

You'll typically need proof of identity, proof of address, proof of income, and bank statements. Some lenders may require additional documentation, such as a driver's license or vehicle registration. Be sure to check with your chosen lender for their specific requirements.

Yes, you have the right to settle your agreement early. However, some lenders may charge an early repayment fee, so check the terms of your contract. If you're considering settling early, contact your lender to discuss your options and any potential fees.

A representative APR is the annual interest rate that at least 51% of successful applicants will receive. It's a useful benchmark for comparing different car finance deals, but keep in mind that your actual rate may differ based on your individual circumstances.

Yes, many car finance companies cater to self-employed individuals. You may need to provide additional documentation to prove your income, such as tax returns or business accounts. Be prepared to demonstrate a stable income and a good credit history to increase your chances of approval.

The application process can vary between providers, but many offer instant decisions online. If approved, you could have your car within a few days to a week, depending on the lender and dealership. Some providers may require additional documentation or a physical signature, which could extend the process slightly.

Missing a payment can have serious consequences, including late fees, damage to your credit score, and even repossession of the car. If you're struggling to make payments, contact your lender as soon as possible to discuss your options. They may be able to offer a payment holiday or restructure your loan to make it more manageable.

This depends on the type of finance agreement you have. With PCP, you'll need to get permission from the lender before making any modifications, as you don't own the car outright. With HP and personal loans, you have more flexibility, but it's still a good idea to check with your lender first. Some modifications may affect the car's value or insurance, so it's essential to consider the implications before making any changes.

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Page last updated on: 17/05/2024

Page reviewed by: Shay Ramani

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