How to Get a Car on Finance: Your Step-by-Step Guide

What Is Car Finance and How Does It Work?

Car finance allows you to spread the cost of a new car or used car over a set period of time. Instead of paying the full amount of money upfront, you make monthly payments to a lender, broker, or finance company. The total you repay depends on the loan amount, interest rate, and the length of the repayment term.

Car finance can be structured in different ways, including hire purchase (HP), personal contract purchase (PCP), or a personal loan. Each has its own terms, benefits, and considerations. This guide applies whether you’re buying from a dealer, broker, or using products from high street lenders like Lloyds Bank car finance.

What is the best way to get car finance in the UK?

The best way to get car finance in the UK is to compare deals online. Start by checking your credit score, then choose between options like hire purchase or PCP. Use comparison tools to find low-interest offers that suit your budget and personal circumstances.

Step 1: Decide on the Right Finance Option for You

Before applying, understand the key car finance options:

Choosing the right finance option depends on your monthly budget, whether you want to own the car, and how long you plan to keep it. Some lenders may include commercial vehicles or motorcycles as eligible assets.

Step 2: Check Your Credit Profile

Your credit score, credit file, and credit history influence whether a lender will approve you and the interest rate (APR) or APR representative you’ll be offered. Those with bad credit may still get finance, but at higher interest rates.

You can check your score for free with UK credit reference agencies. Improving your credit report before applying can help you access better car finance deals. Be prepared for additional affordability checks based on your borrowing history.

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Step 3: Set a Budget and Use a Car Finance Calculator

Knowing your monthly budget is crucial. Use a car finance calculator or loan calculator to estimate:

• Your monthly repayments
• The total cost of credit
• The amount of interest and lump sum if any

Also consider costs like road tax, insurance, fuel, and maintenance. Make sure your financial situation allows you to manage all of this. Online tools from providers like Lloyds or other banks may integrate with your online banking.

Step 4: Get a Personalised Quote or Soft Search

Use an online application or app to get a personalised quote. Many lenders offer a soft credit search so it won’t impact your score.

This will show your estimated APR, monthly repayments, and any required deposit. Communication is often via email and may involve signing paperwork electronically.

Step 5: Apply for Car Finance

Once you’ve compared offers, start your application. You’ll typically need to:

• Be a UK resident
• Hold a full driving licence
• Provide proof of regular income
• Share details about your bank account, address, and employment

Some providers approve applications within a couple of hours, especially online or through a dealership. Some may check with your current finance provider if you’re switching.

Step 6: Choose a Car That Matches Your Approval

Once approved, you can shop for a car that fits within the agreed loan amount and repayment term. The price of the car, condition, and age will also affect your deal.

Ask for a representative example and be sure to compare both the cost of your car and the total cost of credit over the full term of the loan.

Step 7: Review Your Finance Agreement Carefully

Before signing, double-check:

• The APR (annual percentage rate) or apr representative
• Any early repayment charge
• Terms for the end of the contract or end of the agreement
• Any balloon payment if using PCP
• Conditions related to mileage or wear and tear

You should feel confident the plan suits your personal circumstances and is with a reputable finance company.

Correct as of 11 June 2025

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