Car finance

Car finance explained

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    Easy and transparent car financing
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    Find the right type of car finance for you
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    Check your eligibility with no impact on your credit score

Zuto is a credit broker, not a lender. Our rates start from 10.6% APR. The rate you are offered will depend on your individual circumstances. Representative Example: Borrowing £8,000 over 60 months with a representative APR of 20.9% the amount payable would be £208 a month, with a total cost of credit of £4,486 and a total amount payable of £12,486.

What is a car finance agreement?

Financing is a way for you to buy a car without needing to pay the whole amount upfront. With over 15 years’ experience, financing a car is made simple with Zuto.

We work with a number of lenders to provide deals that are right for you, and our team is always on hand to guide you through the process, from start to finish – they’ll even help you find a car to suit your budget and needs.

There are three main types of car finance – hire purchase (HP), personal contract purchase (PCP) and a personal loan – we also help customers who are self-employed, have no deposit, or need car finance with bad credit.

It’s easy to get started straight away, but if you want to find out more, have a look at our options below or get in touch with our team.

Car finance types

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    Hire purchase (HP)

    The most popular type of car finance, hire purchase finance involves monthly payments and you own the car outright at the end of the agreement.

    Hire purchase car finance

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    Personal contract purchase (PCP)

    Monthly payments based on the depreciation, with the option to pay a balloon fee and buy outright when the term ends.

    PCP car finance

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    Used car finance

    Get a personalised quote on used cars – we can even help find the right vehicle for you. Used car finance can be a convenient option for drivers looking for a second-hand car.

    Used car finance

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    No deposit car finance

    You don’t always need a deposit to get a car loan. Some of our lenders can help get you on the road, with affordable monthly payments spread over an agreed term.

    No deposit car finance

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    Electric car finance

    Thinking of making the move to electric? We work with lenders who offer finance for new and used electric cars, making it more affordable to drive an EV.

    Electric car finance

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    Negative equity car finance

    Some of our lenders may be able to help you finance a car, even if you have negative equity. Find out your options, and how you can transfer your negative equity to a new agreement.  

    Negative equity car finance

Why do people choose car finance

There are many reasons why people choose to use finance for their vehicle. Some of those reasons are:

  • Flexible payments. You can control how long your term agreement is and how much you’re paying each month.
  • Having different car finance options available can make it easier to get the latest car without needing to pay the whole cost up front.
  • Get a model upgrade. With certain finance options, such as PCP, you can hand back the vehicle at the end of the agreement and start the journey all over again with a newer model.
  • Boosting your credit score. Having finance where payments are regularly made and never missed can help boost your credit score.

How does car finance work?

Car finance offers people the opportunity to purchase a vehicle without having to make a large upfront payment. Instead of paying the entire cost of the car in one go, buyers can spread out the cost over a set period through monthly payments. This makes owning a car more accessible to a wider range of people.

The amount of money you can borrow for car finance varies based on several factors. These factors include, but are not limited to, the chosen finance option (such as Hire Purchase, Personal Contract Purchase, or Personal Loan), the length of the finance term, and the interest rate applied to the loan. Affordability is a key consideration, as lenders assess an individual's financial situation to determine how much they can comfortably repay each month.

Car finance options available to you

The three main types of car finance are:

Hire purchase (HP)

The most popular of Zuto’s car financing options, hire purchase is easy to understand. Hire Purchase (HP) enables individuals to purchase a vehicle through a structured repayment plan with regular monthly repayments. It offers an accessible route to vehicle ownership without the need for a large upfront payment. 

You select a vehicle and pay an initial deposit, usually around 10-20% of the car's price, although this can be optional with no deposit options available. The remaining balance, plus interest, is divided into fixed monthly repayments over an agreed-upon term, often ranging from 2 to 5 years. You don’t own the car until the end of the agreement, after you’ve completed all the payments.

HP is applicable to both new and used cars, making it a versatile option for a range of budgets. It's ideal for drivers who are committed to owning the vehicle at the end of the agreement and prefer a straightforward financing approach. HP is also advantageous for those who may not have access to a lump sum for a substantial down payment.

The pros of hire purchase:

  • You want fixed monthly repayments.
  • You want to own the vehicle once all repayments have been made.
  • You want flexibility in terms of vehicle choice.

The cons of hire purchase:

  • You may have to pay an initial deposit.
  • The overall cost of the car may be higher due to interest charges.
  • You don’t own the car until you’ve completed all the payments.

Personal contract purchase (PCP)

With PCP, you pay off the car’s depreciation value, instead of making payments towards the full price of the car. For example, if the car you buy costs £15,000, and is expected to be worth £10,000 when your term ends, your payments will be based on the depreciation of £5,000.

PCP agreements involve three main components: a deposit, monthly payments, and a Guaranteed Minimum Future Value (GMFV) of the car. During the PCP term, the monthly payments cover the depreciation of the vehicle's value, rather than the entire cost of the car. This arrangement allows for lower monthly payments compared to traditional HP agreements.

You then have the choice to either return the vehicle at the end of the agreement or pay a lump sum (known as a balloon payment) to buy the vehicle. You may also be able trade the car in for a different model at the end of the term.

PCP is a good choice for people who like driving new cars regularly and want flexibility at the end of the agreement. It's suitable for those who prioritise lower monthly payments and enjoy having options to either upgrade, return, or purchase the vehicle.

The pros of personal contract purchase:

  • You like to change your car frequently.
  • Flexibility with multiple options at the end of the agreement.
  • Generally lower payments than a HP agreement.

The cons of personal contract purchase:

  • Owning the car at the end may require an additional payment.
  • Your agreement may have mileage limits.
  • The car may depreciate more than expected, which means you may owe more than anticipated.

Personal loan

The only car finance type that isn’t secured against the vehicle itself, a personal loan is an amount of money borrowed from a provider used to pay for a car. You will then make regular loan repayments to the finance company plus interest over an agreed term. Bear in mind that even if you sell the vehicle, you will still be responsible for making the loan repayments.

You will typically need a good credit score to be approved for a personal loan, and you don't get the same level of protection as you do with other car finance plans (as the loan is not secured against the vehicle). 

Read more on consumer protection.

The pros of a personal loan for car finance:

  • You wish to sell on/make modifications to your car.
  • You want to buy an older or high-mileage vehicle.
  • You want to own the car from the start.
  • You want more flexibility in terms of where you purchase your car.
  • You may get lower interest rates than with HP or PCP.
  • You won’t get any mileage limits.

The cons of a personal loan for car finance:

  • Interest rates can vary depending on your credit score.
  • Depreciation of the car’s value affects you directly.
  • Personal loans may have shorter repayment periods than PCP or HP, meaning higher monthly costs.

The benefits of car finance

Car loan and credit products can help make vehicle payments affordable, allowing you to get on the road. But what other benefits can you take advantage of?


The practicality of car financing options lies in the fact that you can get the car you want now without having to pay for it in one lump sum – allowing you to balance your finances more evenly. This means your bank balance won’t take a large hit straight away and you’ll be able to manage your monthly outgoings more efficiently.


An online application process means that it’s quick and easy for people to apply for car finance and find out if they’re approved, meaning prospective shoppers can apply for their loan in advance of their trip to a dealership. This gives drivers an idea of how much money they have to spend on a new car, so they can budget accordingly.

Do you own the car if you’re on a finance agreement?

In a car finance agreement, ownership of the vehicle varies depending on the type of finance chosen. With Hire Purchase (HP) or Personal Contract Purchase (PCP) agreements, you don’t fully own the car until the payments are completed (including the balloon payment on PCP). While you may be driving and using the car during the repayment period, legal ownership remains with the finance company until the agreed-upon payments have been fulfilled.

An exception to this is when an individual secures a personal loan to finance the car. In such cases, as soon as the loan is used to purchase the vehicle, ownership is typically transferred to the buyer.

Car finance calculator

See how much you could borrow

What to do next

It’s easy to get started with Zuto. You can:

  • Apply online now – we’ll carry out a ‘soft search’ credit check so we can match you with our lenders. This won’t affect your credit score, but lets us and you see what car finance options are available. Get your quote now.
  • Talk to us – we’d love to help! We have a team on hand to support you with car financing – from those small questions early on, through finding a deal that suits your needs, and even advising you on cars. Just call 01625 619 944.
  • Sign up – once you’ve applied, you’ll be given a Zuto account. Within My Zuto, you can keep track of any quotes and even search our database of more than 40,000 cars, sold by our trusted dealers. Apply for car finance.