Your Car Financing Options

Financing your new car is pretty easy because there’s so many options available! Find out more below.

When you need a new car, you need a car… Because, life doesn’t stop for you when your car stops working. You need a replacement fast, and sometimes, your bank account doesn’t have the funds required to buy yourself a new car. Luckily, there are so many car financing options open to you – no matter your credit rating! Yes, from bad credit loans to leasing, where there’s a will, there’s a way. You may not know them all, but you’re in the exact place you need to be to find out more.

In this post, we’ll be taking your through all your car financing options, so you can find the deal that’s right for you. We’ll be weighing up the positives and negatives of each, so you’ll have unbiased and informed approach to securing your next car. These are your car financing options.

Car Financing Options

  1. Take out a Loan

One of the easiest ways to finance your new car, taking out a loan to pay! Finding yourself a good deal on a loan isn’t easy, but when you do it’s a great way of owning your car out right. Most banks or lenders may allow you to borrow the money to finance your new car, and the car will be in your name and will be yours. However, finding yourself a loan if your credit score isn’t great is never easy.

You’ll find that the best loan rates are only open to those with good credit scores, and your borrowing options may be limited if your credit is poor. Whilst it’s not good having bad credit, there are options open to you. Guarantor loans are a form of lending, designed for those with bad credit. Because a guarantor loan doesn’t require your credit score to guarantee the loan, it needs someone to act as your guarantor. They agree to support your application and cover the repayments of the loan should the borrower be unable to. The catch is that they are considerably pricier than other forms of lending. Whilst some loans can be around the 6-18% mark (roughly and dependent on the lender), guarantor loans range between 39.9% – 69.9%. Whilst this is costly, it’s one of the few options open to those with bad credit.

On the plus side, taking out a guarantor loan can help rebuild your credit, so you can have access to the good credit lending options in the future. Also, there’s nothing to pay upfront or any charges for the loan. Owning your car outright means that you’ll be responsible for MOTs and any repairs required. So, if you have a steady income and want to own your own vehicle, taking out a loan may be right for you.

  1. Hire Purchase

Another financing option is to undertake a Hire Purchase contract. You’ll have to put down a deposit before this starts for you. Hire purchase means that you effectively hire the car, until you pay it off – you’re hiring to purchase (clue is in the name). Through monthly payments, you pay a set fee each month until you eventually purchase the car. However, you don’t actually own the car until you’ve made the final payment. It’s technically the car of the hire purchase company, which means should you stop making repayments they can reclaim the vehicle from you.

It’s ideal for those that don’t want to buy a car outright but do want to eventually own a vehicle. Repayments are more manageable too, as you can choose a car with a price that fits your budget. However, interest rates can vary dependent on your credit score. If your credit is bad you may end up paying more interest back on the car. It’s not ideal, especially because if you can’t meet repayments your car will be reclaimed. This makes buying a car outright an easier option, as your guarantor (if you use a guarantor loan) secures your repayments, should you be unable to. Which means, no one will take your car away.

  1. Leasing

An increasingly popular car financing option in the UK is leasing. It works in a similar way to hire purchase but offers a bit more choice. Through a dealership or third-party lender, you pay monthly payments on your car for an agreed loan term. Some range anywhere from 1 year to 4, and it’s dependent on the leasing provider. Throughout the term, you’ll be paying towards ownership of the car, however, unlike hire purchase, you’re given an option at the end. You can either return the car to the leasing company or pay the remaining amount and own the car yourself. Again, the price is dependent on the car you want, and interest rates vary from lender to lender. It’s a great way of having a car, without owning it, and then choosing if you want to buy it in the end.

However, unlike bad credit loans, there is a deposit and initial fee you must pay before you can start leasing – which can sometimes be a few months payment upfront (but again, this is dependent on the lender). Leasing is an ideal option for those unsure about whether owning a car is best for them. They do rely on credit scores however, so you may not be able to lease a car if your credit is poor. For bad credit holders, seeking financial products and services (like leasing or hire purchase), you may find it increasingly difficult to land the best interest rates. Car financing is dependent on your credit and what the best option is for you.

Like we’ve said, there’s loads of options open to those looking for car finance – it’s all about finding the method that works for you. Whether you want to own your car or simply lease it, there’s options for both good and bad credit holders. There are even more car financing options out there, we’ve only covered a few on our list, but it’s important to shop around and find the right one for you.