How to Get a Cheap Car on Finance?

If you’re looking to get your next car on finance, you want to ensure you are getting the best deal possible and not paying more than you need to. The beauty of using car finance to fund your next vehicle is that you can spread the cost of owning a car into monthly payments. But how do you ensure you get the cheapest deal possible? There are a number of car finance agreements available, but the guide below explores hire purchase car finance and how it can benefit you. Not only is hire purchase one of the most straightforward ways to finance a car but it can also be suited to people with less than perfect credit scores. Let’s take a look at how hire purchase car finance works and how to get a cheaper car loan. 

Cheap Car on Finance

How does hire purchase car finance work?

Hire purchase is a straightforward car finance deal. You choose the car you like, and the value of the car is split into monthly payments over an agreed term, usually 3-5 years. Monthly payments also included additional fees and usually an interest rate. If accepted for finance, you can then use the car until the end of the term. HP is a secured loan which means the lender owns the vehicle throughout and you won’t take ownership of the vehicle until all payments have been made on time and the final ‘option to purchase fee’ has been paid. HP can be suited to those with lower credit scores as the lender can use the car as collateral if you fail to repay. This is why it’s important that you never take out a car finance deal that you can’t afford to pay back. Missed or late payments and defaults on your credit file can seriously affect your ability to borrow in the future. 


Factors that affect hire purchase car finance costs:


  • Bad credit. As mentioned above, it can be easier to obtain a HP deal with bad credit when compared to other forms of finance. However, the best car finance interest rates are reserved frow people with good credit as they are less of a risk to lend to. If you have a particularly bad score, you can be charges more in interest to help secure the deal. 
  • Size of the loan. The larger the loan amount, the higher your monthly payments will be. So, if you’re looking to finance an Audi on a small budget, you may need to be more realistic with what you can put forward or choose a cheaper car.
  • Interest rate. Your car finance interest rate is really important when it comes to how much you pay. Your interest rate offered reflects the rate of borrowing and a lower interest rate means you pay less overall. 
  • Length of loan term. When you compare car finance rates, you could be tempted to choose the longest term possible. Spreading the cost over a longer term reduces how much you pay each month but taking longer to pay your loan increase the amount you pay in interest overall.


How to get cheaper car finance:

If you’re looking for the cheapest car finance deal possible, there are a number of ways in which you can help to reduce your loan amount. 


  1. Have a bigger deposit. With hire purchase, the more you put in for your car finance deal can help to reduce how much you need to borrow from the lender. This helps to reduce the loan amount and make your deal more affordable. A smaller loan can reduce your monthly payments or allow you to choose a shorter term and pay it off faster.
  2. Increase credit score. Whilst you can get car finance with a low credit score, it’s always best to increase your score where you can. A better credit score makes it easier to get accepted, instils more trust in your application and helps you get a lower interest rate. You can increase your credit score by making all current financial commitments on time and in full, reducing high levels of existing debt, keep applications to a minimum and only using a small amount of your credit limit.
  3. Choose a cheaper loan. A cheaper car loan usually reflects a cheaper car. It’s worth exploring different makes and models to see which cars you could get the best deal on. For example, Vauxhall finance with bad credit may be more suitable as used Vauxhalls tend to be cheap to finance. 
  4. Stick to your budget. When you’re shopping for cars, it can be an exciting time but don’t stay too far away from what you can afford. It’s really important that you can meet all your payments on time and in full so sticking to your budget is key, if not, it can lead to more serious financial consequences. 
  5. Lower the term length. It may seem stupid that it’s recommended to choose a lower loan term as that means higher monthly payments. However, a longer term means you are paying more money each month in interest and paying for a longer period. Choosing the shortest loan term for your budget can be the best way to reduce how much you have to pay in additional fees.

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