Finance Options for Car & Motor Dealers

The current finance landscape at UK dealerships

Buying a car in Great Britain increasingly starts with finance. Most dealerships now work with multiple specialist lenders to offer packages that suit a range of credit profiles, which makes the showroom feel like a one stop shop. Convenience is the draw. Flexible deposits, mileage choices and tailored term lengths help many drivers get the keys sooner. PCP has become the default for new cars thanks to lower monthly payments and a final optional balloon, while HP remains a favourite for used vehicles where straightforward ownership is the priority.

Rates, however, matter more than ever. With interest costs elevated, the difference between an eye catching monthly figure and the true cost over the term can be significant. Transparent explanations of APR, fees and end of agreement choices build trust and help buyers avoid surprises. That transparency is not just good practice. It aligns with the FCA’s focus on clear customer outcomes in motor finance. Add in digital tools that allow instant comparison across PCP, HP, personal loans and leasing, and customers are better placed to benchmark any dealer quote.

Flexibility is reshaping how dealers structure offers. Tailored deposits, payment holidays and bundled extras like warranties or servicing can create value, particularly for those rebuilding credit. For some buyers, 0% APR promotions remain compelling, though these typically require excellent credit, higher deposits or shorter terms. Electric and low emission models can sometimes benefit from government-backed incentives that reduce the effective price, which many manufacturers show directly in their finance examples.

Understanding APR is not just about percentages. It is about what you will pay in pounds and pence over time.

The takeaway is simple. Dealer finance can be quick and flexible, but the best outcome comes from comparing options, reading the small print and asking direct questions about costs and end-of-term choices.

Who benefits from this guidance

If you are planning to buy a car or van in the UK and want a clear view of finance options before you visit the showroom, this guide is for you. First-time buyers will find plain explanations of PCP and HP. Experienced drivers can use it to check whether dealer finance still stacks up against a bank loan or lease. If you have a mixed credit history, you will learn how flexible dealer packages and specialist lenders may help. And if you are considering an EV, we outline how grants and incentives can be reflected in finance examples.

Your main ways to pay monthly

1. PCP - Lower monthly payments with a large optional final payment. Suits new cars and those who like to change vehicles frequently.

2. HP - Higher monthly payments with no balloon. Ownership transfers at the end. Favoured for used cars and straightforward budgeting.

3. Lease (PCH) - You rent the car for a fixed term with mileage limits. No ownership at the end.

4. Personal loan - Borrow from your bank to buy the car outright. You own from day one, then repay the loan separately.

5. Dealer 0% APR promo - Limited offers for strong credit, often with higher deposits or shorter terms.

6. Variable rate PCP or HP - Can offer initial savings but monthly costs may move with rates.

7. Guarantor or specialist credit - For those with limited or adverse credit histories via lenders that work with dealers.

8. EV finance with incentives - PCP or HP that factors in manufacturer support or government grants where available.

What it costs and why it matters

Small differences in APR can add hundreds of pounds over a typical 3 to 4 year term.

Who is eligible and what lenders look for

Eligibility varies by product and lender. Dealers typically partner with a panel of finance providers that assess affordability, credit history and stability. A steady income, clean credit file and a realistic deposit improve your chances of approval and better rates. PCP and HP both require you to pass credit checks and demonstrate that monthly payments fit your budget. For 0% APR deals, expect excellent credit, larger deposits and shorter terms. Used car HP can be more forgiving and is often preferred when you want ownership without a balloon.

If you are exploring options before visiting a showroom, Kandoo is a UK-based retail finance broker that can help you compare deals from multiple lenders. That can provide a benchmark, so you can walk into a dealership with a clear idea of what good looks like. For EVs, check whether any current incentives are already reflected in the on-screen example. These can change and may have eligibility criteria tied to vehicle type, price caps or delivery dates.

From quote to keys in clear steps

1. Set a realistic budget including insurance and running costs.

2. Check your credit file and correct any errors early.

3. Compare PCP, HP, lease and loan quotes online.

4. Ask the dealer for a full written finance example.

5. Review APR, fees, deposit, term and total payable.

6. Decide mileage and end-of-term preference that suits you.

7. Submit your application and affordability documents.

8. Sign only when every term is clear and in writing.

Pros, cons and careful trade-offs

Read this before you sign

Always compare the total amount payable, not just the monthly figure. Ask the dealer to explain how the APR is calculated and to list every fee upfront. Clarify mileage limits and what happens if your circumstances change mid term. If you choose PCP, be comfortable with the balloon and have a plan for it. For HP, check any option to purchase fee at the end. If interest rates are variable, consider how increases might affect your budget. Keep all documentation and ensure you understand your right to withdraw within the statutory period if you change your mind.

Alternatives worth a look

1. Increase your deposit to reduce interest and monthly payments.

2. Consider a nearly new or used car to lower finance needs.

3. Extend or shorten the term to balance cost versus total interest.

4. Shop manufacturer offers across brands for seasonal promos.

5. Improve your credit score before applying for sharper rates.

Frequently asked questions

Q: Is dealer finance usually cheaper than a bank loan? A: It depends. Dealers can access promotional rates, especially on new cars, but a strong personal loan offer might beat standard PCP or HP. Always compare like for like.

Q: Why is PCP so popular in the UK? A: PCP lowers monthly payments by deferring part of the car’s value to a final optional balloon. It suits drivers who prefer to change cars every few years.

Q: Can I get 0% APR? A: Possibly, if you have excellent credit and meet conditions such as higher deposits or shorter terms. Availability is limited and usually tied to specific models.

Q: Are there grants for electric cars in finance deals? A: Some offers reflect government or manufacturer incentives that reduce the effective price. Eligibility and amounts can change, so check the latest criteria before committing.

Q: What if my credit is not perfect? A: Many dealers work with specialist lenders who consider a broader range of circumstances. Expect higher rates, and focus on affordability and a realistic deposit.

Q: Will mileage limits apply to HP? A: Typically no. Mileage limits are standard on PCP and leases because the lender is exposed to the car’s future value.

Ready to compare and apply

If you want a clear, impartial comparison before you visit the showroom, Kandoo can help you check rates and terms from multiple lenders, then approach the dealer with confidence. A few minutes now can save pounds over the term.

Important information

This guide is for general information only and is not financial advice. Eligibility, rates and offers vary by lender and may change. Always read the agreement carefully and seek independent advice if you are unsure.