How car finance works through Autedia
What is car finance?
Car finance is the term used to describe borrowing money from a lender to buy a new or used car. You’ll typically then need to repay the loan in affordable monthly instalments, plus interest.
Different car loan types come with different terms and conditions, so be sure to read your agreement carefully to ensure it’s the best fit for you.
Why should you choose Autedia for your car finance?
Car Finance Calculator
|Total cost of credit||2,125.46|
Rates from 8.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status.
Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £143.76 per month, with a total cost of credit of £2125.46 and a total amount payable of £8625.46.
What are the different types of car finance?
There are many different types of car finance to consider when you’re looking to find the best deal for you:
Hire Purchase (HP)
Hire Purchase or HP is one of the most popular types of car finance. The car loan covers the full value of the vehicle, so it can lead to higher monthly repayments than other car deals.
The loan will also be secured against the car, which means you won’t become its legal owner until you’ve made all your repayments and paid a small ‘Option to Purchase’ admin fee.
HP loan terms can last between one and six years, but don’t usually include any mileage restrictions and, once you reach the end of the agreement, you’ll own the car.
Personal Contract Purchase (PCP)
Personal Contract Purchase or PCP loans are also secured against the car, but you don’t have to borrow its full value. Instead, you’ll borrow the amount of value the car is expected to lose during your term. This will be the difference between the purchase price and the Guaranteed Minimum Future Value (GMFV).
PCP agreements often last between one and four years, and when you reach the end of your term, you can choose to hand the car back, buy it by paying a one-off balloon payment (equivalent to the GMFV), or use any positive equity as a deposit in a new deal.
With PCP deals, you’ll usually need to agree to a set annual mileage and keep the car in good condition. Additional charges may be required if you exceed this mileage or damage the car beyond standard wear and tear. However, the monthly payments on a PCP deal are typically lower than other forms of finance.
Personal loans differ from HP and PCP finance deals as you can become the car’s owner straightaway. Once you receive the funds from the lender and use them to pay the car’s seller, it’ll be all yours. You’ll then pay back the loan in monthly repayments for a set number of years.
As the loan isn’t secured against the vehicle, it can be riskier for lenders, so you may need to pay more each month or have a good credit score to qualify.
Even so, you normally won’t have to agree to any mileage restrictions and can sell or modify the car before the loan term ends if you wish.
Personal Contract Hire (PCH)
Personal Contract Hire, also known as PCH or leasing, is a type of long-term car rental. Agreements typically last for between two and four years and you’ll pay a deposit, followed by fixed monthly payments throughout this time. You’ll often also have to agree to a set mileage limit and to keep the car in good condition.
Unlike other types of car loan, you won’t have the option to own the car with PCH. Instead, you’ll have to hand it back at the end of the agreement.
PCH could be the right choice for you if you like to change cars often, don’t want to worry about selling the car in the future, and are looking for lower monthly payments. However, keep in mind that you’ll never become the car’s owner, extra charges may apply if you damage the vehicle, and you’ll likely be tied into the lease for the full term.
Guarantor Car Finance
Guarantor loans work in a similar way to personal loans, but the big difference is that they require a guarantor – someone who agrees to step in and make repayments on your behalf if you can’t.
The loan will likely be paid to the guarantor, who will then release it to you. It’ll then be your responsibility to make payments direct to the lender.
Guarantor car finance is often an option for young drivers with little or no credit history or people who have missed payments in the past as it reassures lenders their repayments will be made, either by you or the guarantor.
Guarantors are typically close friends or family members of the borrower. Depending on the lender’s eligibility criteria, your guarantor might need to be over 21, have a good credit score, and be a homeowner.
How to find the best car finance deal for you
There’s no one-size-fits-all when it comes to finding the best car finance deal. The right option for you will depend on your personal circumstances, the car you want to drive, and the way you want to drive it.
Affordability is also an important consideration, especially as many car loan deals last for several years.
If lower repayments are your priority, a PCP deal or leasing may be the best options for you. However, if car ownership is important and you don’t want to worry about any mileage restrictions, an HP agreement could better suit your needs.
What do I need to apply for car finance?
When applying for car finance with Autedia, our online form will ask you to enter a few personal details to get started, including:
- Your full name
- Your date of birth
- Your address history
- Your current employment status
- Your monthly income
It can also be helpful if you can supply a rough estimate of the amount you’d like to borrow and how long you’d like the loan term to last, but don’t worry if you’re not sure yet – these can always change later!
Every lender has different eligibility criteria and may require different documents but, once your application has been received and you’ve been approved in principle, you’ll usually also need to supply:
How much does car finance cost?
The cost of car finance will depend on the car’s purchase price, the deposit you put down, the loan term length, and the interest rate offered. You may also be able to save money if you have an existing car to offer in part-exchange.
The interest rate or APR offered will be based on several factors including your credit history, market forces, and the lender’s eligibility criteria. Taking steps to improve your credit score could help you secure a more competitive APR.
Note: the deal with the lowest monthly repayment might not be the cheapest car finance available, and you could end up paying back more in interest over time.
The most important thing to remember is that cheap car finance is only useful if it’s affordable for you and suitable for your circumstances. A PCP deal with a low monthly repayment but a strict mileage limit, for example, could end up more costly if you need to drive a lot of long distances and pay excess charges.
Can I get car finance with bad credit?
Yes! At Autedia, we have access to a wide panel of lenders including some who specialise in bad credit car finance loans. While a poor credit score can make it more difficult to find a loan, it’s certainly not impossible, even if you’ve been refused elsewhere. Get a no obligation quote today to find out more.
Can I finance a used car?
Yes, there are several used and second-hand car finance options on the market. Used car finance works in the same way as buying a brand-new car, and lets you split the cost of the vehicle into affordable monthly repayments.
Keep in mind that some lenders will have restrictions on the age and mileage of the used cars they can finance – your dedicated account manager will be able to explain more.
Can I get car finance with no deposit?
No deposit? No problem!
At Autedia, we work with several lenders who can offer car finance with no deposit. Your eligibility for a zero-deposit loan will depend on your individual circumstances and credit score, but you could drive away in your new wheels without having to put down a penny upfront.
Buying a car on finance vs. buying outright
When deciding between buying a car on finance or purchasing it outright in cash, consider what’s best for you and your individual circumstances.
If you have savings available, buying a car outright could be the cheapest option. However, it may not be the best choice if you like to change car regularly, have concerns around depreciation (losing value), or need to use the cash for something else like urgent home improvements or a holiday.
Car finance can help you buy a car when you can’t afford to pay for it all in one go, would like to change car after a few years, or would like to be able to hand it back at the end of the loan term.
FAQs - Car Finance Deals
However, if you don’t have the savings available or need a car straightaway, you’re more likely looking to take out car finance with a lender offering the cheapest monthly payments.
Note: Don’t assume that the car loan with the lowest monthly repayment is the cheapest finance option. You may have paid more interest charges by the time the contract ends.
A PCP loan will give you the cheapest monthly repayments. The downside is that you won’t own the vehicle because you’ll only borrow the amount the car will depreciate over the contract period. You’ll have to pay the balloon payment if you want to own the vehicle.
Other finance options, such as HP or a personal loan, have a higher monthly repayment, but you will own the vehicle once the final payment is made.
Simply enter the amount you’d like to borrow and your ideal loan term and select the credit band that best suits your profile (Excellent, Good, Fair, or Bad). The calculator will then work its magic to produce an estimate of your monthly repayments.
Note: the car finance calculator is only an estimate. Your monthly repayments may be higher or lower depending on your individual circumstances and the car you want to buy.
However, you must be over 18 years old and have been a UK resident for at least three years to qualify for a loan.
A part exchange can be accepted in place of a cash deposit. Part exchanging your current car can reduce the amount you need to borrow and, therefore, lower your monthly repayments.
Having a part-exchange or cash deposit and applying for a smaller car loan amount can also be helpful if you have a bad credit rating, as it minimises the amount of risk to the lender and could make an approval more likely.
At Autedia, we have access to a wide panel of lenders including some who can help people with a variety of circumstances, including those with bad credit. These lenders also won’t carry out a hard credit check (and potentially affect your credit score) unless you have been approved in principle and chosen to accept the deal offered.
Everyone has a different credit story, and each car finance application is reviewed individually, taking several factors into account (not just your credit score).
If you have a fair credit score, it’s likely that one of the lenders on our panel may be able to offer you a competitive car finance deal.
Yes, you can buy a car from any reputable UK dealer!
Once you’ve received your approval in principle, you’ll also get access to more than 100,000 vehicles on the car search.
Simply save the cars that catch your eye, and you’ll receive a tailored quote, matching that vehicle. Let your dedicated account manager know and they can do the rest.
Alternatively, you may choose a car from an online car listing site like AutoTrader.
Remember, your account manager is ready and waiting to help you find a car that matches your requirements and your budget.
If your loan is for a lesser amount, your monthly repayments will often be lower as well; alternatively, you could reduce the length of the loan term.
While there is no set deposit amount when buying a car on finance, 10% of the car’s value is typically considered good.
However, don’t leave yourself short; you’ll need to have funds available to cover insurance, unexpected repairs, and running costs.
The settlement amount is calculated based on the outstanding loan balance, less any future interest charges. Some lenders may also charge an early repayment fee.
It represents the annual cost of borrowing on a credit card or loan like car finance and includes interest as well as any other charges you may have to pay, such as an annual fee.
Your credit score will typically impact the loan APR percentage offered to you.