Frequently asked questions about car finance

When it comes to car finance, it can be a bit of a minefield. To help you navigate your way through the clutter, we’ve answered all of your most frequently asked questions about financing a vehicle.

Here at Octane Finance, we like to keep things simple. As specialists in car finance, we pride ourselves on achieving the best possible vehicle funding solutions for our customers. If you need help buying a car, then car finance may be a preferred option, providing you can commit to the agreed monthly repayments. 

Allow us to explain more… 

What are the different types of car finance?

We offer three main types of car finance solutions at Octane, these are; Hire Purchase (HP), Personal Contract Purchase (PCP), and Lease Purchase (LP). Below, we’ve detailed the differences between them:

Hire Purchase (HP)

Hire Purchase (HP) is a popular form of flexible new or used car finance. HP requires an initial deposit followed by fixed monthly payments throughout the duration of your agreement with the lender. 

The monthly repayment amount and duration of contract is dependant on the initial deposit, which can be offset by trading in your existing vehicle. You’ll then pay off the value of the car in regular monthly instalments, so you won’t actually own the car until you’ve paid back the loan in full. Take a look at our Hire Purchase page to find out more.  

Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is a finance solution that can prove to be a more cost-effective option due to the lower monthly repayments. This is because you won’t end up paying off the full market value of the car in question, unless you decide to keep the vehicle.

PCP gives you the flexibility to take ownership of the car at the end of your contract by paying a final balloon payment, or you can opt to trade it in. This is a good option if you like to change your car regularly, or wish to upgrade to the latest model. For more information, read our Personal Contract Purchase page.   

Lease Purchase (LP)

Lease Purchase (LP) is a form of finance which results in you eventually owning the car. Much like a general lease or rental agreement, you will be tied into an agreement over a certain number of months - including an advance payment (usually charged at the price of one month’s loan amount). 

Unlike with a PCP agreement where the balloon payment is optional, you are required to pay a final fee - also referred to as a Guaranteed Minimum Future Value (GMFV). The balloon payment will be determined by the car’s age and mileage at the end of your agreement. To understand more, take a look at our Lease Purchase page.  

What makes you eligible for car finance?

To apply for car finance, you are required by law to be at least 18-years of age or older. Some lenders may even be restricted to an upper age limit too, so always check with the finance provider before committing to an agreement. 

An ideal candidate for car insurance is someone with a good or excellent credit score, is in full-time employment, and has no previous credit issues. However, we appreciate that not everyone falls into this category. To put your mind at rest, we’ve addressed your most asked questions when it comes to car finance eligibility:

Can you get car finance if you’re self-employed?

The short answer is yes, you can absolutely apply for car finance if you are self-employed and working as a sole trader. However, due to the potential vulnerability of your annual income, not all lenders will be willing to loan at a preferential rate. 

To find out more, give us a call to speak with one of our experienced brokers who can advise you accordingly. 

Can you get car finance if you have bad credit?

Although it can prove more difficult, obtaining car finance if you have bad credit is still achievable. As the cost of living crisis worsens and bills continue to rise, more and more people are at risk of having a poor credit score, resulting in bad credit history. 

Whether you’ve previously missed loan repayments, filed for bankruptcy, or had a CCJ against your name, lenders are becoming increasingly open to helping those who may need it most. At Octane Finance, we are fast-becoming the number one choice for individuals looking to obtain car finance with a poor or bad credit score. Head over to the Bad Credit Finance page of our website to find out more. 

Can you get car finance with a guarantor?

Guarantor loans are a way of accessing car finance if you struggle with a bad credit score or poor credit history. A guarantor is someone who will apply for a loan on your behalf, so the guaranteeing party (usually a close friend or family member) takes accountability and is responsible should you fail to make the monthly repayments. 

Can you get finance with no deposit?

Yes, being approved for car finance is achievable without the need of an initial upfront payment or deposit. Some lenders specialise in offering zero deposit car finance, but this will of course affect your monthly repayments if you do proceed without an upfront payment. 

Many of the lenders we work with here at Octane Finance can offer our customers car finance solutions without the need to put down a deposit first. To find out more, head over to the No Deposit Car Finance page of our website.    

How do you apply for car finance?

When you’ve got your eye on a new car but don’t have the funds to pay for it upfront, you’ll no doubt want to explore the financing route. Once you’ve identified the best form of car finance for you, the next step is to apply for the loan.

Here at Octane Finance, we pride ourselves on securing vehicle funding for our customers by working with a wide range of lenders to help you secure the funds needed for your new set of wheels. Take advantage of our free online Finance Calculator to find out how much you can borrow. 

As a dedicated credit broker, we do our best to secure the best deal possible. Get started and Apply for Finance by filling out the easy-to-use online form for a quick two-minute application, following which a member of our expert finance team will be in touch to help with your enquiry.     

Does applying for car finance affect your credit score?

Applying for car finance shouldn’t have a negative impact on your credit rating, unless you make numerous applications. Entering into a car finance agreement can actually boost your credit score in the long-term, as long as you make all the monthly repayments on time.

Remember that if you apply for finance on multiple occasions within a short space of time, it may signal to lenders that you could have finance worries and are struggling to manage them. 

What’s the difference between a soft credit and hard credit check? 

Credit checks can seem overwhelming, but the important thing to remember is that there’s a difference between the two. Hard checks are visible to companies, so they can see what other loans you’ve applied for and when, whereas soft checks aren’t visible on your credit history report, so they won’t affect your credit score in the same way. 

It’s worth noting that finance lenders will always be able to check if you’ve been successful in applying for credit or not in the past, which may affect their overall decision to lend. 

What is car finance APR?

APR stands for Annual Percentage Rate. The idea behind APR is that it gives you a better indication of what the true cost of entering into a finance agreement is. For example, the higher the APR rate offered by the lender, the more you’ll pay on a monthly basis, and the total fee overall. 

All lenders use the APR method as standard, so as a consumer, you can compare APR figures to identify the best HP or PCP car finance option for you. Leasing a car works differently, so you won’t be able to compare APR when opting for this method of funding.   

What is guaranteed car finance?

Guaranteed car finance is a term thrown around, but there is actually no such thing. To ‘guarantee’ that someone will be eligible for car finance no matter what their circumstances, is simply not possible. Always be wary if a lender seems to offer what they call ‘guaranteed car finance’, as this is not a regulated offering. Instead, many lenders will allow you to appoint a guarantor instead. 

Can you terminate a car finance agreement?

If you’re hoping to cancel your car finance agreement early, then there are some hurdles to jump first. It is possible to terminate your finance agreement - such as a PCP or HP loan - but this is subject to strict terms and conditions. 

Also referred to as ‘voluntary termination’ under the consumer credit act, you will be required to pay 50% of the overall balance due before you can cancel the contract and return the car. 

Fuel your car finance at Octane 

Here at Octane Finance, we can cater for all of your car finance needs no matter what your requirements. Whether you’re hoping to secure a loan for a new car, used car, prestige or supercar, classic car, or even a race car, then enquire today.  

We hope you find the answer you’re looking for in our article, but if for some reason you’re still unsure, then don’t hesitate to get in touch. Our dedicated and expert team are only too happy to help.