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Car finance

What is car finance?

Car finance is a term that covers the different ways you can buy a car without paying the full price upfront. It makes owning a car more affordable by spreading the cost of your car across several years.

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How car finance works

Whatever type of car finance you choose, you'll borrow money from a lender to eventually own a new or used car. You can also take out a lease agreement on a car for a given period of time.

You’ll usually pay an initial deposit, and then fixed monthly repayments for the duration of your agreement.

As part of your car finance contract, you’ll need to stick to certain rules. These may involve, for example, servicing the car according to its manufacturer's schedule, or not going above a set number of miles each year. Once you’ve paid what you owe, depending on the terms of your contract you’ll either own the car outright, pay a final lump sum to buy it, or return the car.

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Different types of car finance

Hire Purchase (HP)

HP finance allows you to spread the cost of the car by making monthly payments over an agreed term. It could be right for you if you want to buy the car at the end of the agreement, without making a large final payment.

Learn more about HP finance

Personal Contract Purchase (PCP)

With PCP finance, you make equal monthly payments over an agreed term. At the end of the agreement, you can decide to hand the car back to the lender, change it for another one or buy the car with an 'optional final payment'.

Learn more about PCP finance

Popular car finance questions

Find your next car

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