Since cars are getting more expensive, it’s no surprise that financing has become the most common way to buy a new one. But because there are so many options, choosing the best way to pay for a car can be challenging.

It might take some time to figure out how each works, but getting the right financing is essential. Here, we look at the different ways you can pay for your car and illustrate why they may or may not be the most suitable alternative.

Types of Automobile Financing

There are various ways to stretch out the expense of an automobile, but the following are the most common:

  • A lease-purchase arrangement (HP).
  • A private buy and sale agreement (PCP).
  • A personal loan is often issued by a bank.

It might be tough to choose whether to use the term auto financing or auto loan, yet these terms refer to the same thing! In each of the above three situations, you will borrow money and pay back the lender with interest over time. Most personal loans aren’t backed by anything, but PCP and HP auto financing are backed by the car.

Hire Purchase

It is a way to finance a car that lets you pay for it in monthly instalments over a certain amount of time. Monthly payments are usually greater than with a PCP, but you own the automobile at the end of the term.

Generally, you can drive as per your liked miles in a year, which means you can drive as much as you want. A common myth is that you can’t get auto financing with no down payment through a Hire Purchase agreement. This is not true.  If you intend to keep the vehicle at the conclusion of the term, a Hire Purchase arrangement may be ideal for you.

The main characteristics of a Hire Purchase are:

  • Typically, fixed-term contracts range between 2 and 5 years.
  • Each month, an equal amount will go toward eliminating the debt.
  • You may initiate your financing with or without an initial deposit.
  • After all, when the last payment is made, you’ll gain the car outright.

Individual Contract Purchase (PCP)

PCP is a type of auto financing plan that lets you make manageable monthly payments over the course of an agreed-upon contract term. You can pay an extra (optional) balloon payment at the end of the contract. The lump sum payment is only needed if the vehicle is purchased entirely.

  • The first choice is to give the car back to the loan company (it must be in excellent condition, and you must not have exceeded the agreed-upon mileage; otherwise, additional costs may apply).
  • The second option is to trade it in for another vehicle and start a new lease on that one (subject to status).
  • The third and final choice is to make the final balloon payment and then take possession of the car.

PCP may be the best option for you if you plan to buy a new car every few years or if you’re not sure if you’ll want to buy the car at the end of the term.

The primary attributes of PCP are:

  • Typically, fixed-term contracts range between 2 and 5 years.
  • Even monthly payments over the length of your assurance.
  • Almost always, a deposit is required.

Personal Loans

A personal loan is another option that could work well for people with a very good credit score.

These kinds of loans are often unsecured and can be handled via your bank if you so want.


When you opt for a financial institution to seek a personal loan, you don’t have to say anything about the car you want to buy. Your bank will give you a loan offer based on how much money they think you can borrow and pay back easily.

Examine your credit score

Your credit score can particularly influence the interest rate provided for an auto loan.

Before you apply for auto financing, you should look at your credit score and see if there’s anything you can do to improve it. There are a few straightforward strategies to improve your credit score, including:

Register on the Electoral Roll

Simply verifying your residence can enhance your credit score.

If the information on the electoral roll matches the address on your credit file, this suggests that the information on your credit file is accurate.

Check for Errors

Even though errors on your credit report are uncommon, if there are any, they might be affecting your score. Verify that no open debts or credit cards are listed, especially if they have been paid off, and look for any errors. Then, you may contact the three largest credit reference organisations in the United Kingdom to get these false facts corrected.

Experian, Equifax, and TransUnion are the names of these three credit reporting organisations. And for the time being, if you need a loan, then you can also opt for car loans with no credit check in Ireland.

Once you’ve determined whether or not you can increase your credit score, you may determine whether or not this has changed the interest rates given for auto financing. And even if you have credit that isn’t quite as stellar as it could be, there are still ways to get a decent deal for yourself.

You may, for instance, select a different vehicle and attempt to borrow less total. There are several lenders who specialise in bad credit auto financing, so you should be able to obtain the vehicle you need while spreading out the expense of payments with a vehicle loan.

Do Proper Research

Today, it is simple to conduct internet research and connect with a diverse range of lenders.

Compare the provided auto loans based on various parameters, including the annual percentage rate (APR), the possible term length, and the interest rate.

Consider your circumstances and the numerous kinds of financing to determine which one is the greatest fit for your specific situation.

Once you’ve gathered all the relevant information, contrast and evaluate the various vehicle loan offers and choose the one that best meets your demands. This strategy is really hands-on, but it gives you control over where you obtain your auto loan.


Regardless of the form of financing you choose, it is always advisable to conduct a preliminary study. Consider how much you should spend on a vehicle if finances are your primary concern.

When financing stretches out the expense, it might be tempting to go for the flashier models, but you must also consider the car’s operating costs and any maintenance bills.


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