Guide to car finance
At Oodle, we understand that a new car can carry a big cost, and waiting to save might not always be an option - especially if your current car breaks down or your family circumstances change. Car finance can be a good solution, allowing you to spread the cost over months or years. However, it's important to explore your options before committing to credit.
Representative 14.7% APR
What is car finance?
Put simply, car finance is the process of taking out a loan to buy a car. It's a way to spread out the cost of a vehicle over a period of time rather than having to pay for it all up front.
How does car finance work?
Car finance spreads out the cost of a car purchase over a set period of time. When you opt for car finance, you borrow money from a lender to pay for the vehicle. You then repay the loan in instalments over an agreed-upon timeframe, which is typically a few years.
The amount you can borrow and the interest rate you'll pay will depend on several factors, such as your credit score, income, and the price of the car. If you have a good credit score and a stable income, you're more likely to be approved for a loan with favourable terms, such as a lower APR.
Types of Car Finance:
There are different types of car finance, like car loans, hire purchase (HP) and personal contract purchase (PCP) and personal contract hire (PCH). It’s important to consider all your options to help decide which one suits you best. Here we take a look at the different types of car finance available.
Unsecured Personal Loan
Hire Purchase (HP)
Hire purchase (HP) is where you make a regular monthly payment for a used car with a fixed interest rate – meaning you know exactly how much you are paying every month. The deposit can be flexible or even not required at all. The car is owned by the lender until you pay the last monthly instalment and the option to purchase fee.
Personal Contract Purchase (PCP)
An option to pay a deposit (normally 10%) and then make fixed monthly payments. You’ll have options to buy or return the car at the end of the contract with a balloon payment. Interest rates may be higher, and it’s important to make sure you understand the terms of the contract before you sign.
Leasing
When you lease a car, you’re paying for the use of the car without ever owning it. It’s a bit like renting and can be a flexible option, especially if you like changing cars frequently. Monthly costs may be lower, but extra charges can apply, for things like additional mileage or 'excessive wear and tear' fees.
(once you’ve paid the option to purchase fee)
Getting accepted for car finance
Maintaining a good credit score is the best way to improve your chances of acceptance. Sticking to monthly payments, using a budget, avoiding too many credit commitments, and check your credit report regularly to help keep your score in good health.
When you apply for a car loan with Oodle, we’ll let you know if you’ll be pre-approved for credit without affecting your credit score.
You can find out more about credit scores and credit checks here: