Types of car finance


You can apply for a personal car loan from a number of places, including banks, credit unions, building societies, car dealers and specialist online lenders. In general, car loans tend to be much quicker to arrange than other types of car finance.

To qualify for a car loan you’ll have to pass a credit check. In most cases, the interest rates will be fixed but you may be able to find variable deals. You then just need to decide on the length of the loan period. This will usually be dependent on your monthly budget.

Alongside car loans there are a range of other car finance options available. Alternatives to getting a car loan include hire purchase, personal contract purchase and personal contract hire.

Hire purchase

With hire purchase (HP), you borrow an amount equal to the value of the car. After paying an initial upfront deposit you then make fixed monthly payments over a pre-agreed term, during which the finance provider lets you use the vehicle. If you fail to keep up with your repayments, the lender may be able to reclaim the car. Once you have paid off the agreed amount in full, plus the option-to-purchase fee, you own the car. Find out more about hire purchase here.

Personal contract purchase

Personal contract purchase (PCP) agreements also let you borrow a fixed amount. With PCP deals, the amount you borrow tends to cover only the estimated depreciation of the car rather than its total value, meaning that the monthly repayments are often smaller. If you want to buy the car at the end of the agreement however, the final cost will be greater. As with HP, PCP agreements allow you to drive the car during the duration of the agreed term, but you don’t own the car. You are given the option of purchasing the vehicle at the end with a lump-sum 'balloon' payment. Find out more about PCP agreements here.

Personal contract hire

Personal contract hire (PCH) is a popular way to lease a car. With PCH you agree to hire the car for a set timeframe and you pay an initial upfront rental fee. You then have full use of the vehicle during the rental period and you return the car at the end. There is no option to buy at the end of the agreement.

Types of car finance


You can apply for a personal car loan from a number of places, including banks, credit unions, building societies, car dealers and specialist online lenders. In general, car loans tend to be much quicker to arrange than other types of car finance.

To qualify for a car loan you’ll have to pass a credit check. In most cases, the interest rates will be fixed but you may be able to find variable deals. You then just need to decide on the length of the loan period. This will usually be dependent on your monthly budget.

Alongside car loans there are a range of other car finance options available. Alternatives to getting a car loan include hire purchase, personal contract purchase and personal contract hire.

Hire purchase

With hire purchase (HP), you borrow an amount equal to the value of the car. After paying an initial upfront deposit you then make fixed monthly payments over a pre-agreed term, during which the finance provider lets you use the vehicle. If you fail to keep up with your repayments, the lender may be able to reclaim the car. Once you have paid off the agreed amount in full, plus the option-to-purchase fee, you own the car. Find out more about hire purchase here.

Personal contract purchase

Personal contract purchase (PCP) agreements also let you borrow a fixed amount. With PCP deals, the amount you borrow tends to cover only the estimated depreciation of the car rather than its total value, meaning that the monthly repayments are often smaller. If you want to buy the car at the end of the agreement however, the final cost will be greater. As with HP, PCP agreements allow you to drive the car during the duration of the agreed term, but you don’t own the car. You are given the option of purchasing the vehicle at the end with a lump-sum 'balloon' payment. Find out more about PCP agreements here.

Personal contract hire

Personal contract hire (PCH) is a popular way to lease a car. With PCH you agree to hire the car for a set timeframe and you pay an initial upfront rental fee. You then have full use of the vehicle during the rental period and you return the car at the end. There is no option to buy at the end of the agreement.

Types of car finance


You can apply for a personal car loan from a number of places, including banks, credit unions, building societies, car dealers and specialist online lenders. In general, car loans tend to be much quicker to arrange than other types of car finance.

To qualify for a car loan you’ll have to pass a credit check. In most cases, the interest rates will be fixed but you may be able to find variable deals. You then just need to decide on the length of the loan period. This will usually be dependent on your monthly budget.

Alongside car loans there are a range of other car finance options available. Alternatives to getting a car loan include hire purchase, personal contract purchase and personal contract hire.

Hire purchase

With hire purchase (HP), you borrow an amount equal to the value of the car. After paying an initial upfront deposit you then make fixed monthly payments over a pre-agreed term, during which the finance provider lets you use the vehicle. If you fail to keep up with your repayments, the lender may be able to reclaim the car. Once you have paid off the agreed amount in full, plus the option-to-purchase fee, you own the car. Find out more about hire purchase here.

Personal contract purchase

Personal contract purchase (PCP) agreements also let you borrow a fixed amount. With PCP deals, the amount you borrow tends to cover only the estimated depreciation of the car rather than its total value, meaning that the monthly repayments are often smaller. If you want to buy the car at the end of the agreement however, the final cost will be greater. As with HP, PCP agreements allow you to drive the car during the duration of the agreed term, but you don’t own the car. You are given the option of purchasing the vehicle at the end with a lump-sum 'balloon' payment. Find out more about PCP agreements here.

Personal contract hire

Personal contract hire (PCH) is a popular way to lease a car. With PCH you agree to hire the car for a set timeframe and you pay an initial upfront rental fee. You then have full use of the vehicle during the rental period and you return the car at the end. There is no option to buy at the end of the agreement.