Cost-effective is car credit?

Cost effective car finance plans are becoming increasingly popular in the UK. If you can`t buy a car outright, then car credit is the perfect option for you to get your dream car. We at Car Credit Centre are credit brokers and finance specialists that can help you secure the best financial deal for your budget. Let`s take a look at how car financing works in the UK, including the eligibility criteria and the different types of car financing available. 

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What is car finance? 

Car finance, also known as car credit, refers to various financial products that help you purchase a car. These financial products include car loans and leases. 

This is a great alternative for people who cannot afford to buy a car straight up. Car finance can help you get the car you want without having to pay a big fat deposit. 

Instead, you will pay affordable monthly payments for your choice of car. It`s like a loan that covers the cost of the car. You are able to spread out the cost over a period of months or years, whichever is feasible for you. 

The lender owns the car until you have paid the full borrowed amount, including any interest or additional charges. But, you have complete access to the car whilst paying your monthly payments. Once you have made your payment in full, the car is yours to keep. 

What is the eligibility criteria for car finance?

Several aspects can affect your eligibility for car finance. We are going to explore some of these factors below. 

  • You need to be a minimum age of 18 years old.
  • A resident of the UK, unfortunately, most car finance companies won`t accept temporary residents. 
  • Credit scores will be reviewed. The higher your score, the greater your chances are of being approved for a car finance plan. 
  • Employment status will be taken into consideration. If you have a stable, long-term job, your chances of being approved for car finance are more likely. Your chances are lower if your income is dependent on benefits or if you are retired. 
  • The car you want to be financed will be reviewed. The car needs to be under 8 years old when your finance plan begins and less than 12 years old when the plan ends. 

What are the different types of car finance?

Most car finance lenders tailor plans to suit your budget. You can choose to pay a large initial deposit to lower your monthly payments or a longer period to spread the cost out further. 

The following factors vary and are dependent on what is suitable for you and the lender: 

  • Monthly cost
  • Interest rate
  • Terms of agreement
  • Duration of plan

Now let`s take a look at some of the types of car finance.

Hire Purchase

Hire purchase is the most basic type of car finance. 

It allows you to spread the cost and interest rate over a specified period. You are not always required to make a deposit. However, an initial deposit will help cut down the monthly cost. It allows you to trade in your old car as a deposit. 

The lender will take the price of the car, subtract the deposit and add interest. Then the final amount is divided over the agreed duration. This is generally between 2 to 5 years. 

The monthly payments always remain consistent, and you will never have to pay a lump sum at the end of your plan.   

Once you have completed paying your car finance plan, the car is yours to keep. 

Personal Contract Purchase

This plan offers lower monthly payments than the Hire Purchase, only if you choose to make a final payment at the end of your plan. 

This is known as a balloon payment. It reduces your monthly payments but requires you to make a lump-sum payment at the end of your plan. 

This type of car finance plan is generally between 3 to 5 years. 

Conditional Sale

A conditional sale is a good option for people who want to keep the car at the end of the plan without having to pay anything at the end of the car finance plan. 

The deposit is usually 10% of the car`s value. It requires you to make higher monthly payments so that you have zero fees to pay at the end of the plan. 

It features a longer repayment plan ranging from  2 to 6 years. 


Car credit allows you to acquire the car you want without having to make a full up-front payment. 

To apply now for your car credit, visit the Car Credit Centre.