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How to find the right car finance option for you

So, you’re ready to buy your car. You’ve seen the one you want. You’ve done the research online. How are you going to find the right car finance option for you?

There’s lots of options out there. Here’s 5 questions that can help you find the right one for you.

Question 1: Is this the right type of finance for me?

Before you even look at the rate, have a think about the type of financial product you’re looking at.

You can buy a car using a range of different ones: Hire Purchase (HP), Personal Contract Purchase (PCP), Personal Contract Hire (PCH) or an unsecured personal loan.

How much the finance costs will depend on which option you choose and how good you are with managing credit.

It’s also worth thinking about your priorities before you pick. Some, like HP, have a higher deposit up front, but when you finish paying back your loan you’ll own your car. With PCP, you often pay less at the beginning and on a monthly basis but won’t own your car at the end without a large payment (the ‘balloon’ payment) at the end. Find out more about the different finance options.

Question 2: Is that rate a flat rate or an APR?

This is important because if it’s a flat rate loan, the total cost will be a lot more.

With a flat rate loan, you pay interest on the whole amount that you borrowed at the beginning of the loan, which means the interest rate is often nearly double what you’ll pay if you’d taken out a similar looking loan with an APR rate. With APR the interest is calculated based on how much you have left to repay, meaning it’ll reduce throughout your loan term. Many car finance providers or dealerships still use flat rate loans rather than APR to make loans appear cheaper than they are.

Question 3: Is this the rate that I will get?

The rate that you might see advertised on the side of the car or on a website is the headline rate – this rate is given to 51% of borrowers but it means 49% of applicants will receive a higher rate when they come to apply.

The majority of finance providers in the UK won’t show you the actual rate you’ll be offered until you’ve gone through the application process

With a Zopa loan or Zopa  car finance,  the rate that you’re offered with us is very much unique to you and your personal circumstances and we’ll show you that rate before you apply.

The rate you’ll be offered will depend on your individual circumstances and every lender will look at a variety of different things to ensure they give you a rate that is reflective of your ability to make monthly repayments.

At Zopa, a few of the factors that we look at include:

  • Your existing level of unsecured debt
  • The amount of information in your credit file
  • The affordability of the loan in your financial circumstances
  • Evidence that you’ve paid off credit on time in the past
  • Your credit score, as reported by Transunion and Equifax
  • Whether you’ve applied for a Zopa loan in the past six months


These are the factors that Zopa explores, but you should take these into consideration when applying for a loan with any provider.

Question 4: When they’re checking my credit file, are they doing a hard or a soft search?

While shopping around can help you find the best deal, you also need to be aware that when you check your loan rate with certain providers, it could leave a mark on your credit file.

Some loan providers mark applicants’ credit records in advance of them receiving a personalised rate. If you don’t accept the first offer and the provider does leave a hard mark on your credit score, this will make the second quote more expensive. At Zopa, we offer real rates, letting customers know the actual rate they’ll get, and whether they’ll be approved for the loan, before they apply, all without leaving a mark on their credit score.

Question 5: Have I looked at what else is available?

In our research last year, we found that 68% of people took the first finance deal offered to them at the dealership. With 90% of people having trouble identifying the best available deal, it’s unsurprising that many people will go for the first option they’re offered.

There are a number of different things that you have to consider when purchasing your next car. If you are looking to use finance to purchase your next car, you should remember that shopping around with providers that don’t mark your credit score initially is key, you’re not alone in your confusion and you don’t need to take the first option offered to you.

Find out more about Zopa car loans and Zopa hire purchase.