There are few people, if any, who can afford to buy a car outright. This means that if you are looking to purchase your first, second or third car, you will likely need to look into car finance options.

However, much like mortgages and even personal loans, car finance options can differ based on different scenarios and requirements that the person taking out the loan has. This can make choosing the right finance type trickier.

So, here, you will be walked through how you can choose the right type of car financing for your specific needs. Enjoy! 

Is The Car New or Used?

Firstly, you need to consider the vehicle you are trying to buy; is it brand new and from a lot, or are you purchasing a second-hand vehicle? This will impact the type of vehicle finance that you can apply for. With a PCP deal or leasing, you may be limited to only purchasing newer vehicles, which can be more expensive. If you are buying from a used car lot, then you should enquire as to whether the lot itself offers financing options or if it can point you in the direction of a car finance company that can offer you a loan. 

Credit Scores

It should come as no surprise, but much like a mortgage or a personal loan, if you have better credit, you will be eligible for a wider range of finance options with better interest rates. This could even mean that a personal loan to purchase a vehicle may be more cost-effective for you. However, if you have a weak or average credit score, it may be best to look into an alternative car finance option, such as a hire purchase. Make sure that your credit score is in the best place it can be before applying for any type of car finance option; it will save you money in the long run! 

Do You Want The Car To Be Yours?

When you have paid off the car, do you want to own it? When looking into car finance, you need to consider whether you would prefer the higher monthly repayments that can allow you to own the car at the end of the loan term or if you would prefer to lease the car and pay an almost monthly rental fee. 


Next, are you going to use your car for work, or just to go on trips at the weekends? Some professions, such as dog walkers, will require a car to have higher mileage, and thus, this can impact the type of car finance that you can apply for. Some car financing options, like a PCP, will have a limit on the mileage relating to the car, meaning that the loan is cheaper but comes with restrictions. 

Initial Deposit

Some car financing options require an initial deposit. You will need to consider how much you can afford to put down as a basis and how this will impact the repayment schedule. Generally speaking, the more of a deposit you put forward, the less your monthly payments will be.