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What are my Options for Used Car Finance?

| In Buying Guides

When it comes to buying a car, finance is the UK’s favourite way to do it. The BBC reports that 75% of cars bought in the UK are purchased using finance options and figures from the Finance and Leasing Association also confirm that more than 75% of car sales bought through dealerships are paid for with finance.

So as the UK’s most popular way to pay, we have written this post to help you to decide which car finance option is best for you. Although there are quite a few options for financing a used car in the UK, including Personal leasing, loans cash and savings; we will take a look at the 2 most popular ways to do so, Personal Contract Plans and Hire Purchase.

Personal Contract Plan (PCP)

PCP allows you to afford a much more expensive car for less per month hence the reason why it’s so popular especially as some brand new cars are so expensive nowadays.

As a result when you purchase a new or nearly new car you can benefit from low monthly payments. What separates PCP from other used car finance options is the choice you are given at the end of the contract.

Once you have reached the end of the agreed deal with your lenders; you can hand back the car at no extra cost subject to the agreed terms and conditions, trade it in and start a new PCP deal or you can pay off “the balloon” ( a big lump sum payment at end  of your contract) to buy the car. Incidentally having the final balloon payment is the reason why you generally pay less money each month.

PCP gives you some different options, but you should know that you have to stick to pre-agreed mileage limits; this means that if you did more miles a year than you agreed you will have to pay for those extra miles. The typical price for exceeding a mileage limit is £0.20 per mile.

Another drawback to PCP is that you need to keep the vehicle in a good condition, so if you do return the car at the end of your contract; you will have to pay for any cleaning / damages that you have allowed to happen during the deal.

While the monthly payments tend to be lower than Hire Purchase; typically you will find that PCP is more expensive once the contract is over. 


Hire Purchase (HP)

Cargiant only offers customers hire purchase for used cars, so read on for our handy look into this finance option.

Hire Purchase is perfect for you if you want a simple way to get car finance, and want to own the car when the contract is finished. If you decide to go for HP then, you basically hire the car until the last payment is made; then you have full ownership of the vehicle.

If you sign a deal for HP then you will pay a deposit first, this is usually up to 10% of the car’s value. You then continue to pay once a month until you have paid for the full value of the car. Normally this will take between 1 – 5 years depending on the deal you arranged with the lender.

It is worth bearing in mind that hire purchase cannot cover anything over 10 to 12 years old, the age of your car at the end of the term depends on your finance lender. At the end of your finance term the car cannot be more than 10 years old; so if a car is 7 years old the maximum repayment term will be 3 years or if you have a 12 month plan you can only take out a 4 year finance deal on a car that is 8 years old.

Going forward you pay once a month, but the deal is very flexible. This means that you can pay a lump sum whenever you want and not get charged; unlike PCP where if you pay any extra then you will be charged. Due to having a fixed rate of interest, you can rest easy knowing exactly what you will pay each month!

Something to consider about HP is that you can’t sell or modify the car without approval from the lender. Once you have completed the contract, then you will have to pay a completion fee and depending on your provider; 2 months interest.


We hope this has been helpful for you; to find out more about car finance, please click here.

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