How to get the best car finance deal

Buying a car is one of the biggest investments you can make, but it’s easy to fixate on the monthly payment and overlook what you’ll pay overall. Whether you’re buying new or used, taking a little extra time to compare finance options can make a big difference to the total cost.

Here’s how to find the best car finance deal.

Remember, you can buy a brand new or used car right here on Carwow. And you can sell your car, too. We’re here to help you through every step of your car-changing journey.

Understand your finance options

Before comparing offers, it’s important to know the differences between the main types of car finance available to you.

Personal loan

With a personal loan, you borrow the money from a bank or lender and buy the car outright. You own the vehicle from day one and simply repay the loan each month.

This is often one of the cheapest ways to finance a car if you have a strong credit score because interest rates can be lower than dealership finance.

Personal Contract Purchase (PCP)

PCP is one of the UK’s most popular finance options because it offers lower monthly payments.

You pay a deposit followed by fixed monthly instalments that cover the car’s expected depreciation rather than its full value. At the end of the agreement you can:

• Pay the final balloon payment and keep the car.
• Return the car with nothing more to pay (subject to mileage and condition).
• Use any equity towards your next vehicle.

Lower monthly payments can be appealing, but remember that interest is often charged on the balloon payment too, meaning the overall cost can be higher.

Hire Purchase (HP)

With HP, you pay a deposit and then spread the cost of the entire vehicle over fixed monthly payments.

Unlike PCP, there is no large final balloon payment. Once you’ve made the last payment, the car is yours.

Monthly payments are usually higher than PCP, but you may like the simplicity of owning the car outright at the end of the agreement.

Leasing

Leasing is another popular way to get behind the wheel of a new car. Instead of paying towards ownership, you’re effectively renting the vehicle for an agreed period, usually between two and four years.

You’ll typically pay an initial rental followed by fixed monthly payments, before returning the car at the end of the contract. There is no option to buy the vehicle, so leasing can be a good choice if you like driving a new car every few years and don’t mind never owning it.

We recently crunched the numbers on the UK’s best-selling car, the Ford Puma, to see whether PCP, HP or leasing offered the best deal.

Check your credit score before applying

Your credit score plays a major role in determining the interest rate (APR) you’ll be offered.

Checking your credit report before applying gives you the opportunity to spot any mistakes and improve your chances of qualifying for a more competitive rate.

Even a small reduction in your APR could save hundreds of pounds over the life of a finance agreement.

Compare the total amount payable – not just the monthly payment

Don’t always assume that a low monthly payment is the best deal out there.

Some finance agreements reduce the monthly cost simply by extending the repayment period, which means you’ll pay more in interest overall.

Always ask and look out for the Total Amount Payable. This figure includes:

• Your deposit
• Monthly repayments
• Interest (APR)
• Any final balloon payment

This is the easiest way to compare different finance offers fairly.

Shop around before accepting dealer finance

It can be tempting to accept the finance package offered by the dealership, but it shouldn’t be your go-to.

Compare quotes from banks, building societies and online lenders before you visit the showroom. Having a pre-approved loan can also strengthen your negotiating position.

Even if you ultimately choose dealer finance, you’ll know whether the offer is genuinely competitive.

Look out for 0% APR deals

Manufacturers occasionally offer 0% APR finance promotions on selected models. These deals mean you won’t pay any interest, making them some of the cheapest finance options available.

However, they often require:

• A larger deposit
• Strong credit
• Buying selected models or trims

Always compare the overall package, including the recommended retail price, as discounts may not be available alongside 0% finance.

Negotiate the car price first

One of the biggest mistakes buyers make is discussing finance before agreeing the price of the car. Instead, we’d recommend you negotiate the best possible purchase price, then discuss finance options. Also negotiate any part-exchange separately.

Keeping each part of the deal separate makes it much easier to see exactly what you’re paying and prevents poor-value finance or low part-exchange offers from being hidden within the overall package.

Why it’s worth checking Carwow

If you’re considering finance, it’s worth comparing offers from more than one source. Carwow allows buyers to compare new car prices and finance deals from a network of dealers, helping you see how different offers compare on both monthly costs and the overall amount payable.

Car change? Carwow!

Looking for a new set of wheels? With Carwow you can sell your car quickly and for a fair price – as well as find great offers on your next one. Whether you’re looking to buy a car brand new, are after something used or you want to explore car leasing options, Carwow is your one stop shop for new car deals.

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