What Car Can I Finance for £400 a Month?
Starting With a Number, Not a Number Plate
Most people don't begin their car search by picking a model. They begin with a monthly figure they know they can comfortably afford, and £400 a month is one of the most common. It's a sensible way to shop. The question is what that £400 actually buys you once interest, deposit and agreement length are taken into account. In this guide we'll walk through it in plain English, with realistic examples, so you know what to expect before you start looking.
Is This Guide Right for You?
This is written for UK drivers who have a rough monthly budget in mind and want to understand their options before applying for finance. Whether you're upgrading the family car, financing your first vehicle, or simply curious about what's realistic, you'll find straightforward figures here rather than sales talk.
What £400 a Month Actually Gets You
There's no single answer, because your monthly payment is shaped by four things: the amount you borrow, the interest rate (APR), how long the agreement runs, and whether there's a lump sum left at the end.
As a broad guide, on a Hire Purchase agreement over 48 months with no deposit and an APR in the region of 10%, £400 a month equates to borrowing roughly £15,500 to £16,000. Add a £2,000 deposit and you're looking at cars priced around £17,500 to £18,000. That comfortably covers well-specified used family cars and many nearly-new superminis.
On a Personal Contract Purchase, the same £400 stretches further because a large chunk of the car's value is deferred to a final balloon payment. With a modest deposit, £400 a month over four years can often reach cars priced between £25,000 and £32,000. The trade-off is that you don't own the car at the end unless you pay that final sum.
How the Monthly Figure Is Built
Think of your payment as a simple equation. The lender takes the cash price, subtracts your deposit and any part-exchange value, adds interest across the term, and divides the result by the number of months. On PCP, it also subtracts the Guaranteed Future Value (the balloon) before dividing, which is why the monthly cost drops.
That means you have three practical levers. A larger deposit reduces the amount you borrow. A longer term spreads the cost, though it increases the total interest you pay. And a lower APR, usually offered to those with stronger credit histories, reduces the cost of borrowing outright.
Here's a simplified illustration of how £400 behaves differently across agreement types over 48 months with a £2,000 deposit:
| Finance type | Approx. car price | Own it at the end? |
|---|---|---|
| Hire Purchase | £17,500 | Yes |
| PCP | £28,000 | Only if you pay the balloon |
| Personal loan | £17,000 | Yes, you own it from day one |
Why Budgeting by Monthly Payment Makes Sense
Setting a monthly ceiling before you shop protects you from the most common mistake in car buying: falling for a car first and stretching to afford it afterwards. A fixed monthly figure keeps the decision grounded in your actual household finances.
It also makes comparison genuinely easy. Once you know what £400 buys on HP versus PCP, you can weigh ownership against affordability rather than guessing. Fixed monthly payments are predictable too, which helps enormously if you budget week to week.
That said, the monthly figure should never be the only number you look at.
A low monthly payment and a low total cost are not the same thing. Always ask for the total amount payable before you sign.
Remember to account for running costs as well. Insurance, road tax, servicing, tyres and fuel or charging can easily add £150 to £300 a month on top of your finance, so a £400 finance payment is rarely a £400 motoring budget.
Weighing It Up
| Pros | Cons |
|---|---|
| £400 a month opens up a wide, genuinely good choice of cars | Longer terms lower the monthly cost but raise total interest |
| Fixed monthly payments make household budgeting predictable | PCP leaves a large balloon payment to plan for |
| Deposits and part-exchange can push you into a better car | The car may be repossessed if you fall behind on payments |
| HP means you own the car outright at the end of the term | Mileage limits and condition charges apply on PCP |
| Newer cars often mean lower repair bills and better warranties | Running costs sit on top of the £400, not inside it |
Details Worth Checking Twice
Focus on the total amount payable, not just the monthly figure. Two agreements can both cost £400 a month yet differ by thousands over the full term. The APR and the term length are where that difference hides.
On PCP, check the annual mileage allowance carefully. Exceeding it triggers excess mileage charges, typically a set amount per mile, which can add up quickly. Also read the fair wear and tear standards so you know what condition the car needs to be in if you hand it back.
Be cautious of very long terms. A 72-month agreement will make an expensive car look affordable, but you may find yourself in negative equity if you want to change vehicles early. Check whether early settlement is permitted and what it would cost.
Finally, make sure the payment still works if your circumstances change. A budget that only works on your best month isn't really a budget.
Other Routes to Consider
- Hire Purchase - Spread the full cost and own the car outright at the end. Straightforward, with no balloon payment or mileage limits.
- Personal Contract Purchase - Lower monthly payments with a final balloon sum, plus the flexibility to hand the car back, keep it, or part-exchange.
- Personal Contract Hire (leasing) - Effectively a long-term rental. Often includes road tax and sometimes servicing, but you never own the vehicle.
- Unsecured personal loan - Borrow the money, buy the car as a cash purchase, and own it immediately. Rates depend heavily on your credit profile.
- Buy a cheaper car outright - Reduce or remove the monthly payment altogether and redirect that £400 towards savings or running costs.
- Save a larger deposit first - Delaying a few months to build a deposit can lower your monthly payment or lift you into a better car.
Common Questions
Can I get a car for £400 a month with bad credit? Often yes, though your APR is likely to be higher, which means £400 will buy a slightly less expensive car. Lenders assess affordability as well as credit history, so a stable income and a deposit both help.
Is £400 a month a lot for a car? It sits above the UK average for used car finance but is fairly typical for nearly-new and new vehicles on PCP. Affordability is personal: a common guideline is keeping total motoring costs, including insurance and fuel, within about 15% to 20% of your take-home pay.
Do I need a deposit? Not always. Many agreements are available with no deposit, but putting money down reduces what you borrow and therefore your monthly payment and total interest.
What happens at the end of a PCP deal? You choose one of three options: pay the balloon payment and keep the car, hand it back with nothing more to pay if you're within your mileage and condition terms, or part-exchange any equity towards your next car.
Will checking my options affect my credit score? A soft search or eligibility check does not affect your credit score. A full application involves a hard search, which is recorded on your file.
Where Kandoo Fits In
Kandoo is a UK motor finance broker, which means we search across a panel of trusted lenders rather than pushing one product. You can check your eligibility with a soft search that won't affect your credit score, see the kind of monthly payments and rates you're realistically likely to be offered, and compare Hire Purchase and PCP side by side. No pressure, no jargon, just a clear picture so you can decide what genuinely fits your budget.
Important Information
This article is general information only and does not constitute financial advice. All figures are illustrative examples and will vary depending on your circumstances, the vehicle, the lender and the rate you're offered. Finance is subject to status, affordability checks and lender criteria. Kandoo is a credit broker, not a lender, and is authorised and regulated by the Financial Conduct Authority. Always read your agreement in full before signing.
Buy now, pay monthly
Buy now, pay monthly