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Why Car Finance is the Best Way to Purchase a Vehicle

Why Car Finance is the Best Way to Purchase a Vehicle
Disclaimer – This article is produced in association with Carvine. The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the views or opinion of Global Banking & Finance Review and in no way an endorsement or recommendation. All investments and trading involve risk, users of the GBAF Website must consult a suitably qualified professional adviser for advice and perform their own research. Accordingly, we will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the GBAF Website and within GBAF Content.


Did you know that car finance is the most popular way to buy a new or used vehicle? It removes the burden of having the cash readily available and doesn’t swallow up your savings. Instead, you get a viable way to repay your loan that won’t damage your bank balance. And get to drive away in a brand new car!

This is a great place to start if you’re considering buying a new car. Here we take a look at why car finance is the best way to purchase a vehicle: 

What is car finance? 

Before you consider applying for a car loan, you need to understand what it means. In a nutshell, it is a credit agreement between you and a lender that allows you to pay for a vehicle over a set period of time. 

But, like most other loans, interest will be payable on the amount you borrow. 

Different types of car finance 

Car finance is not a one size fits all. And regardless of how you intend to pay, buying a motor is a significant purchase. Unless you are in the fortunate position to buy your next car outright, it’s likely that you will need to rely on a finance option. 

You can choose between:

Personal Contract Purchase (PCP)

If low monthly payments and flexible buying options sound appealing, then a PCP loan is well worth a look. 

Typically, you place a 10% (or more) deposit and then pay the outstanding amount over fixed monthly repayments. But unlike other types of finance agreement, PCP ensures you never pay more than what the vehicle is worth at the end of your contract. The total amount you pay is based on the guaranteed future minimum value, meaning you only pay for what the car is worth. 

PCP is suitable for those who like to change and update their vehicle regularly and gives you three options to choose from at the end of your contract: 

  • Pay a final lump sum (or the balloon payment), and the car is yours 
  • Return the vehicle to the lender/supplier
  • Exchange the car 

Hire Purchase (HP) 

Like PCP, a hire purchase loan requires a deposit (10% or more) followed by fixed monthly payments. Throughout your contract, the HP company owns the vehicle, and you hire it from them until you make your final payment. 

Once you’ve fulfilled your agreement and all balances are paid, you own the car. 


Leasing, in its simplest terms, is renting a vehicle. But, unlike PCP or HP, there is no option to own the car. But, it does mean you can get your hands on the latest models, tech and best safety features on the market every two to three years. 

Leasing is a fantastic way of driving vehicles that you wouldn’t usually be able to afford. What you pay during your lease is basically a hire fee that covers the car’s depreciation. But you will be expected to front at least three months of rental in advance. 

Personal Loan

A personal loan is one of the most traditional ways to finance a car. Borrowed directly from your bank or building society, you own the vehicle at the point of purchase. After, you pay the loan back to your lender, plus interest, over an agreed period that suits you. 

Interest can vary from lender to lender, and factors such as the length of the loan, your personal circumstances and your credit score will be considered. But, this isn’t a loan for the fainthearted. It’s better suited to people who are in it for the long haul and like to own their vehicle for as long as possible before upgrading. 

Poor credit history isn’t necessarily a bad thing

While having a poor or bad credit history won’t open the doors to the best interest rates or loans on the market, it doesn’t mean that you can’t apply for a tailored bad credit car finance loan from a specialist like Carvine.

Unlike other types of loans, a “bad credit” agreement is the perfect way to get back on the borrowing ladder despite your individual circumstances. Specialist lenders work tirelessly to find you the best kind of loan that won’t damage your credit score but instead build it back up – as long as you make your payments on time. 

Whether you are self-employed, have a CCJ, IVA, bankruptcy or default on your credit file, a “bad credit” loan will open the doors to a more positive relationship with your finances. 

More flexibility at the dealership

Opting for any type of car finance deal will give you more flexibility. You get a wider range of choices, more spending power, more of a say over trim, engine size and colour, and numerous other options that cash alone won’t buy. 

Beyond that, you’ll likely get a decent manufacturer’s warranty (three years/ 60,000 miles minimum depending on the vehicle you choose), and servicing could be included.

But the flexibility doesn’t stop there. Many secondhand dealerships will let you purchase a vehicle with a PCP, HP or personal loan agreement. Just make sure the motor you want is worth the added interest rates!

Access to the latest tech

New vehicles come with the latest technological advancements and the safest features money can buy. From automated emergency braking (AEB) to assisted lane departure and the most up-to-date infotainment systems, you’ll instantly feel like you’ve stepped into the future. 

Electric vehicles (EVs) are more affordable 

EVs are dominating the industry. Most global brands have upped the ante and are offering a variety of plug-in hybrids or pure electric versions of their most popular models. 

With the looming 2030 ban on new diesel and petrol vehicle sales, the race is on to make the switch. Car finance makes this achievable. It opens the door for motorists to upgrade their vehicles without the pressure of upfront costs and will save you money in the long run too. 

From doing your bit for the planet and reducing your emissions to reducing running costs, car finance is the most obvious solution if you plan on upgrading to an EV. 

Car finance is a huge money maker for the motor industry. But it’s also the most affordable way for you to buy a new vehicle. With so many perks to consider, from low monthly payments to more choices at the dealership, car finance just makes sense! 

Global Banking & Finance Review


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