Doncaster: 01302 983 298 Milton Keynes: 01908 084 564 Luton: 01582 286 215

Types of Car Finance

When the time comes to buy a quality used car, the financial aspect of how you are going to fund your new vehicle might be one of the main factors that determine which make or model you can feasibly afford. Whilst there are car finance options available, this can often be a minefield and understanding the different types of finance might leave you feeling frazzled, so we will run through all the options available to you:

How to finance a car

There are now multiple ways to finance the purchase of a used car, but it’s important to find the best avenue for you and your own personal circumstances.

Purchase the car outright

If you have the cash available, you can purchase a used car outright. This means you will transfer the funds, in full, from your bank account to the dealership before you drive away the car. This is a very simple transaction, but not always the best option, particularly if you don’t have the money readily available.

Benefits: You own the car outright and don’t have to worry about any monthly payments or your circumstances changing.

Car finance options

You can choose to take advantage of car finance options that are available from our third-party finance providers. There are a range of car finance options available which allow you to pay a monthly fee to the finance provider in exchange for them purchasing the car with their funds.

Benefits: By financing a car, you can often afford a newer or higher specification car, rather than waiting until you have the funds saved up.

Bank loan

You may find a bank loan works better for you, especially if there are good rates available when the time comes to start your car buying journey. Your bank will transfer you the funds, which you will then transfer to the dealership, in exchange for a monthly recurring payment which you will make to the bank until the money is paid back.

Benefits: If you can find a low interest rate option, you can end up paying less per month than you would with a third-party finance provider.

Part Exchanging a Car

If you have an existing car that you will no longer need when you purchase your quality used car, you may benefit from part exchanging it with the dealership. Part exchanging a car has a multitude of benefits and allows you to free up some funds to put towards your new vehicle:

Hassle Free Experience: By part exchanging your car with us, it means you don’t have to go through a private sale. Selling your car privately means you need to spend time advertising the car, dealing with the enquiries and of course keeping the car taxed whilst it sells. You could declare your car as SORN, but this process takes additional time and effort.

Instant valuation: When you advertise your car for sale privately, you can often get inundated with people haggling the price of your car, wanting a bargain. When you part exchange, you will be provided with a valuation from our qualified and knowledgeable team. You can then decide to apply this value as collateral against your new purchase.

Applying for car finance

If you decide that financing your new vehicle is the route you want to take, we would be happy to guide you through the process here at Perrys Used Car Outlet. We will walk you through the finance options available to you, put you in contact with our third-party finance providers and help you with the application.

The application process is straightforward, but expect to answer a lot of questions based on your financial situation. Therefore, we recommend you have this information to hand; pay slips, any monthly commitments, and any regular outgoings.

We do have a 30 second eligibility checker so you can see how likely you are to be accepted for car finance before you visit our dealership.

What is HP Car Finance

HP finance, also known as Hire Purchase, is one of the simplest methods of financing a car. You simply pay a deposit, usually around 10% of the purchase price, and then ongoing fixed monthly payments until the funds are repaid in full.

What is important to know about a HP finance agreement:

  • You own the car outright once your final monthly payment has been taken
  • Your monthly payments are fixed

What is PCP Car Finance

Commonly known as Personal Contract Purchase, a PCP agreement is slightly more complicated and has more moving parts to the contract. For example, at the end of a PCP agreement, you can:

  • Return the car
  • Keep the car by paying the resale value (also known as a Balloon payment)
  • Put the resale value towards a new car

What’s important to know about a PCP finance agreement:

  • You do not own the car, unless you pay the Balloon payment at the end of the contract
  • Monthly payments tend to be lower with this type of agreement

Personal Contract Purchase VS Hire Purchase

  Personal Contract Purchase Hire Purchase
Monthly Payments Lower Higher
Own Car No Yes
Deposit Higher Lower
Fixed Annual Mileage Yes No 
Benefits Drive a new car every few years, no requirements to buy car, lower monthly payments Chance to drive a higher priced car, you will own the car outright after final payment, don't need to estimate mileage


It’s important to understand the car finance options before you embark on your car buying journey as it can impact what cars you can afford. Speak to the team here at Perrys Used Car Outlet in Doncaster, Milton Keynes and Luton who are happy to help.

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