How to offer car finance to customers

Why finance belongs at the heart of your sales

Finance has become the default way Britons buy cars. In recent years, 80-90% of new cars and a rising share of used vehicles have been bought on finance, reflecting the reality that upfront costs remain high and consumers value predictable payments. The market is not only large but growing: the Finance & Leasing Association reported an 11% year-on-year rise in new business volumes in March 2025, signalling renewed confidence and sustained demand across new and used segments. For dealers and brokers, this is an opportunity to boost conversions, protect margins, and widen your customer base.

Affordability remains central. The average monthly car finance payment is around £244 in 2025, up about 8% since 2022, yet still increasing more slowly than overall living costs. Most customers spend roughly 11% of income on car finance, a useful benchmark for affordability conversations. At the same time, over 6 million UK adults currently use car finance - more than one in ten - underlining the scale and stability of the customer base. Used car finance also set a record in 2023 with about 1.5 million agreements, supported by growing interest in no-deposit options among budget-conscious and younger buyers.

Transparency remains the decisive factor in a high-rate environment. Consumers are sensitive to interest costs and wary of complex jargon. Clear explanations of APR, fees, and end-of-agreement choices help customers judge value in real terms. Research suggests only around 7% of applicants are refused, but inclusivity matters: soft searches, responsible affordability checks, and a fair panel of lenders help you serve near-prime customers without overpromising.

Understanding APR is not just about percentages - it is about knowing the pounds-and-pence impact over the term.

Build trust with disciplined processes: give representative examples, present multiple options side by side, document affordability, and never bury the balloon payment or mileage limits. Customers respond to clarity, and regulators expect it. A UK-based retail finance broker like Kandoo can help you access a broader lending panel, streamline checks, and keep your offers competitive while you stay focused on stock and service.

Bottom line: Offer finance early in the conversation, explain it plainly, and align products to genuine needs. That is how you lift acceptance rates and lifetime value.

Who is likely to benefit

If you sell new or used vehicles in the UK - from independents and car supermarkets to franchised dealerships - integrating finance into your sales flow helps you meet modern customer expectations. Buyers increasingly arrive pre-qualified or at least finance-aware, and many will compare deals on their phones while on your forecourt. Presenting clear, compliant options keeps you in the conversation.

This guide also suits brokers and online marketplaces looking to increase conversions, improve affordability screening, and offer inclusive solutions such as no-deposit and near-prime products. If you handle stock with a range of price points, finance broadens access for first-time buyers while protecting cash buyers’ experience with transparent alternatives.

The language of car finance - explained

• APR - The annual cost of borrowing including interest and certain fees - compare deals like-for-like.

• Representative APR - The advertised rate that at least 51% of accepted customers will get.

• PCP - Personal Contract Purchase with lower monthly payments and a final balloon.

• HP - Hire Purchase with fixed payments and ownership after the last instalment.

• GFV - Guaranteed Future Value - the optional final payment in PCP.

• Deposit - Upfront contribution lowering the loan and monthly cost.

• Term - Length of the agreement in months - typically 24-60.

• Balloon payment - The optional lump sum to keep the car at PCP end.

• Soft search - Eligibility check that does not affect credit score.

• Affordability - Income-and-outgoings assessment to ensure payments are sustainable.

• No-deposit finance - Products enabling £0 upfront, subject to credit and vehicle criteria.

Pick your finance route

1. PCP - Lower monthly payments, flexible end options, mileage-limited. Typical rates start from around 8.9% APR with representative 14.9% depending on profile and vehicle.

2. HP - Straightforward path to ownership with fixed payments and no balloon. Useful for higher-mileage drivers or older vehicles.

3. PCH - Personal Contract Hire suits drivers who never want to own. Lease-style, return at term end, mileage charges may apply.

4. Conditional sale - Similar to HP but with ownership transferring automatically when terms are met.

5. Personal loan via broker - Unsecured loan paid to the customer. Keeps car unencumbered but rates may vary by credit tier.

6. No-deposit plans - Reduce barriers for first-time buyers. Ensure affordability evidence and clear disclosure of total cost.

7. Near-prime and guarantor options - Expand acceptance for light credit blips. Use a responsible lender panel and clear income checks.

Tip: Present two or three options side-by-side so customers can compare monthly cost, total payable, and end-of-term choices.

What it costs and why it matters

Are your buyers eligible

Eligibility depends on the customer and the vehicle. Lenders will assess credit history, income stability, and current commitments to judge affordability. Soft searches can pre-qualify without marking the customer’s file, but full applications require proof of ID, address, income, and sometimes employment checks. Vehicle criteria matter too - many lenders limit age and mileage at both start and end of term. For PCP, a robust Guaranteed Future Value is essential, which often favours newer stock.

You should prepare for a spread of credit profiles. While most applications are approved, around 7% are typically declined, which underscores the value of a panel that includes prime and near-prime options. No-deposit finance is possible where affordability supports it, particularly on used stock, but you should document the rationale carefully. Throughout, be transparent about fees, optional extras, and end-of-agreement responsibilities. This protects customers and safeguards your FCA compliance.

From hello to handover - a simple sequence

1. Offer finance early and check soft-search eligibility.

2. Present two or three suitable product options.

3. Explain APR, fees, term, and end-of-term choices.

4. Gather documents - ID, address, income evidence.

5. Complete affordability and underwriting checks.

6. Issue pre-contract disclosures and SECCI.

7. Sign electronically and confirm payout with lender.

8. Handover vehicle and provide aftercare contact.

Upsides and trade-offs at a glance

Red flags to consider before offering a deal

High rates and complex products amplify the risk of misunderstandings. Take time to explain APR in pounds and pence, including any fees, and show how the total payable changes with term length. For PCP, check mileage assumptions match the customer’s real use to avoid end-of-term charges. Scrutinise affordability if a buyer requests no deposit - sustainable payments are better than short-term wins. Ensure your sales scripts, disclosures, and advertising are FCA-compliant, with representative examples that at least 51% of accepted customers can achieve. Transparent processes build trust when interest rates are elevated and online comparison is only a tap away.

If finance is not the fit

1. Larger cash discount - Present a transparent price-versus-finance comparison.

2. Shorter-term HP - Reduce interest paid while keeping fixed payments.

3. Personal loan from bank or credit union - Keep vehicle unencumbered.

4. Salary sacrifice for EVs - Potential tax-efficient route for eligible employees.

5. Wait-and-save plan - Reserve the car with a holding deposit where appropriate.

Frequently asked questions

Q: Is car finance still affordable in 2025? A: Average payments are around £244 per month and typically about 11% of income, though individual affordability varies. Clear budgeting and sensible terms keep finance sustainable.

Q: PCP or HP - which is better for my customers? A: PCP suits those wanting lower monthly payments and flexibility at term end. HP suits drivers targeting ownership with predictable payments and no balloon.

Q: Can customers get no-deposit finance? A: Yes, subject to credit and affordability. It is increasingly popular on used cars, but you must evidence sustainable repayments and disclose the total cost clearly.

Q: Will applications hurt a credit score? A: Soft searches will not. A full application records a hard search. Using soft-search pre-qualification helps protect credit files while exploring options.

Q: What acceptance rate should we expect? A: Most suitable applicants are approved, but around 7% may be declined. A broad lender panel, accurate income data, and realistic vehicle choices improve outcomes.

Q: How do higher interest rates affect offers? A: Rates influence monthly cost and total payable. Transparency and side-by-side comparisons help customers judge value and choose appropriate terms.

Move from interest to approval

Audit your current process, then embed finance at the start of every enquiry. Set up a compliant script, adopt soft-search tools, and partner with a UK-based broker panel for reach and speed. Track acceptance rates, average APR, and time to payout. Small improvements at each step compound into more sales and happier customers.

Important information

This guide is for general information only and is not financial advice. Product availability, rates, and criteria vary by lender, vehicle, and customer profile. Always follow FCA rules and provide full pre-contract disclosures before customers commit.