How to Secure Car Finance

Oliver Lewis
Jul 29
4 min read

Updated: Jul 30

Getting a car is a big step for many people. Whether for commuting to work, family outings, or simply a love for driving, having the right car finance can greatly enhance your experience. With various options available in the UK, understanding how to secure car finance is essential. This guide provides the key steps to navigate the process smoothly and confidently.

Understand Your Financial Situation

Before you begin exploring car finance options, it's important to understand your financial situation thoroughly.

Start by determining your budget. Look at your income and subtract your monthly expenses, so you know how much you can afford to allocate toward a car payment.

For instance, if your monthly income is £2,500 and your expenses total £1,500, you may have around £1,000 left over. But don't forget to factor in additional expenses like:

A potential down payment, which could range from 10-20% of the car’s price.
Insurance costs, which for many drivers average around £750 per year.
Maintenance and fuel costs, which can add another £150 monthly depending on usage.

Being clear on these numbers will empower you to make better choices in your car finance search.

Research Your Financing Options

Once you have a budget, the next step is to explore your financing options. In the UK, you typically have three main types of car finance to consider:

Personal Contract Purchase (PCP): This option allows you to drive a new car without paying the full price upfront. You make monthly payments for a set period, often three to four years, after which you can either buy the car for a predetermined final payment or return it.
Hire Purchase (HP): This financing method involves monthly instalments, similar to PCP. However, at the end of the term, you own the car outright. A typical example might involve a 10% deposit followed by two or three years of fixed payments.
Personal Loan: This straightforward option allows you to borrow money from a bank to buy the car outright, giving you full ownership. Interest rates on personal loans can vary widely, so shopping around is beneficial.

Evaluate each option based on your preferences and financial circumstances to see what best fits your needs.

Check Your Credit Score

Your credit score is crucial in determining your eligibility for car finance. Lenders assess your credit history to understand the risk of lending you money.

It's wise to check your credit score before applying for finance. You can obtain a free report from agencies like Experian or Equifax. If your score is below 600, you might want to take steps to improve it, which could include paying off outstanding debts or ensuring you make timely payments on bills.

Improving your credit score can significantly enhance your chances of getting better terms – like lower interest rates – saving you money over time.

Gather Necessary Documentation

Once you have chosen your preferred financing option, gathering the necessary documents is crucial for a smooth application process. Most lenders will ask you to provide:

Proof of Identity: This can include a passport or driver's license.
Proof of Residency: Utility bills or bank statements that show your address can suffice.
Proof of Income: Pay slips, tax returns, or bank statements that confirm your earnings.

Having these documents on hand will help speed up your application and make the process more hassle-free.

Compare Lenders and Interest Rates

Not all lenders offer the same loans or interest rates, so it's wise to shop around. To save yourself a lot of time, speak to Hawkstone Motor Finance. Our job is quite literally to find you the best possible rate available to you based on your circumstances.

Apply for Finance

Once you've gathered your documentation and conducted your research, it’s time to apply for car finance.

You can typically apply online, or over the phone by calling 01656 47 00 66. During your application, be prepared to present the required documents and answer questions regarding your financial history and stability.

Be cautious, though. Applying for several loans across different lenders can hurt your credit score, so it may be best to limit your applications to a few carefully selected options. Hawkstone Motor Finance won't send you to any unsuitable lenders, as to avoid negatively affecting your credit score.

Read the Terms and Conditions

When you receive a finance offer, it’s essential to read the terms and conditions carefully.

Pay particular attention to details like the interest rate, repayment period, any additional fees, and the total cost of the finance agreement.

Ensure you fully understand all costs involved, as hidden fees can create long-term financial strain. If you have any questions, feel free to speak to one of our experts by calling 01656 47 00 66.

Plan for Repayments

Before finalising your finance agreement, it’s vital to have a repayment plan in place.

Budget for your monthly payments, and consider any possible income fluctuations or unexpected expenses. For instance, if you have a monthly payment of £300, ensure your budget includes this regularly with room for emergencies.

This planning will help prevent financial stress and could aid in maintaining a good credit score over time.

Finalise Your Purchase

After agreeing to the terms and conditions, you can move forward with your car purchase.

If you're buying from a dealership, they will typically handle most of the paperwork and registration in your name. If you secured a personal loan, you will use these funds to buy the car from the dealer or private seller directly.

Always check that all the paperwork is complete and correct, and ensure you receive confirmation of your purchase along with any warranties and service agreements.

Empowered Decision-Making

Securing car finance in the UK doesn’t have to be complicated if you follow these steps.

From assessing your financial situation to researching lenders and finalizing your purchase, being well-informed will enable you to make confident decisions.

Whether you choose PCP, HP, or a personal loan, consider all aspects, including interest rates and repayment terms.

As you drive away in your new vehicle, you can feel assured knowing you made a well-informed choice.