Best car finance

Car finance is an agreement that allows you to buy or lease a car and repay the borrowed money over a set period of time. The most common types of car finance are Hire Purchase (HP), Personal Contract Purchase (PCP) and Personal Contract Hire (PCH).

Car finance is an alternative to buying a car outright which can be expensive. You borrow money from a lender and repay it with interest over an agreed term, usually 3-5 years. With Hire Purchase (HP), you own the car outright once all payments are made. With Personal Contract Purchase (PCP), you have the option to make a final balloon payment to buy the car, or hand it back and walk away. With Personal Contract Hire (PCH), you never own the car, it’s essentially a long-term rental.

With Hire Purchase (HP), you pay a deposit and then fixed monthly payments until the car is fully paid off, at which point you own it outright. With Personal Contract Purchase (PCP), monthly payments are lower because you’re only paying off part of the car’s value. At the end of the term, you can make a final balloon payment to own the car, trade it in for a new one, or hand it back. PCP offers more flexibility; HP is more straightforward if you want to own the car.

Yes, buying or leasing using car finance will impact your credit score. During the application process, the lender will run a 'hard check' on you, which will leave a mark on your credit report. But, as long as you stay on top of repayments and settle the amount in full, the overall effect on your credit score should be positive.

The credit score required for car finance varies by lender, but a good or excellent credit score gives you access to the best car finance deals and lowest interest rates. People with a fair or poor credit score may still be able to get car finance, but may face higher interest rates or need a larger deposit. Using a soft eligibility checker before applying means you can see your chances without affecting your credit score.

The best way to compare car finance deals is to look at the total amount repayable (not just the monthly payment), the APR, the length of the term, any deposit required and what happens at the end of the agreement. Our rankings above compare car finance companies based on real customer reviews, covering the quality of service, transparency of terms and overall satisfaction.