Online car financing offers convenience and more lender options, while in-person financing provides room for negotiation – ultimately, the best choice depends on your credit and priorities.
Want to hit the road but can’t afford to pay an arm and a leg upfront? Don’t stress! Car Finance is an increasingly popular method of paying for a car, with over 2 million cars bought on finance in the UK between May 2023 and May 2024.
It is a way in which you can enjoy your dream car one instalment at a time, spreading the cost of the car over several monthly manageable payments. There are also different car finance packages to suit your personal needs and budget – the two most popular methods include Personal Contract Purchase (PCP) and Hire Purchase (HP).
But before you hop behind the wheel of your dream motor, you will first have to decide whether you want to find your car online or in-person. Read on to explore the pros and cons of both options, helping you to find the method that best saves you time and money.
Online Car Financing
Online car financing makes it more accessible than ever to get behind the wheel, even if your credit score is bad.
How Do I Apply for Car Finance Online?
- Gather Required Information: Prepare your basic personal details (name, address) alongside financial documents such as your income, employment status, and any existing debts.
- Submit an Online Application: After finding your preferred car finance solution, complete the online application form through the credit broker’s or lender’s official website. Avoid submitting multiple online applications in a short space of time, as lenders will often use a hard credit check that can negatively affect your credit score.
- Receive Loan Offer: After submitting your application and an approved credit check, you will receive your loan offer. This offer will outline the terms, including the interest rate, loan amount, and repayment period.
- Finalise the Deal: Once you’ve accepted the offer and completed all remaining paperwork online, the lender will then process the loan and give you the money to buy your car.
Advantages of Online Car Finance
- Convenience and Accessibility: With online car financing, everything can be sorted from the comfort of your home. This means you can fit car finance around your busy schedule. Online brokers like Bad Credit Motor Finance also provide round-the-clock personalised guidance throughout the process, ensuring any questions you have are answered.
- Time Efficiency: The online application process is typically faster than traditional methods as much of the paperwork can be completed on your time. Online financing allows you to skip the multiple weeks wait for approval.
- Wide Range of Lenders: Online brokers can connect you with a diverse range of lenders, including those who specialise in working with bad credit profiles. This increases your chances of finding a lender who can offer favourable terms.
Disadvantages of Online Car Finance
- Risk of Fraud: Ensure you work with a reputable, FCA-regulated online broker to avoid potential scams. Moreover, by checking online customer reviews of the broker, you can piece together a better idea of how the company operates.
- Potential Hidden Costs: Be aware of any fees or charges that might not be immediately apparent. Make sure to read the fine print of any signed contract and don’t be afraid to ask about any hidden costs. Transparency is key to avoiding unpleasant surprises.
In-Person Car Financing
For some, the traditional route remains the reliable way to purchase a car. Here’s the lowdown on how this classic method works and what you can expect along the way.
How Do I Apply for Car Finance In-Person?
- Visit the Dealership: Pick a dealership that sells the type of car you’re interested in to utilise your time efficiently with the salesperson.
- Credit Application: Once you’ve chosen a car, the dealership will ask you to complete a credit application, involving the same documentation as an online application.
- Review Financing Options: The dealership will submit your credit application to multiple lenders. You may receive offers from various sources, including the dealership’s in-house financing options.
- Discuss Terms: In-person car finance offers you the opportunity to haggle over different loan terms, interest rates, and monthly payments.
- Finalise the Loan: After agreeing on the terms, complete any remaining paperwork and the money is yours.
Advantages of In-Person Car Finance
- Personalised Service: Going to a dealership allows you to discuss your financial situation face-to-face. This personal interaction can help the salesperson understand your specific needs and tailor the financing options accordingly.
- Immediate Feedback and Negotiation: One benefit of meeting in-person is the ability to tweak the terms to fit your needs. If you feel comfortable with haggling, you can help land a deal that is adjusted to your credit profile.
- Flexibility with Dealers: Some dealerships offer in-house financing options and special promotions that you might not find elsewhere. Again, it typically requires some negotiation, but savings can be found.
Disadvantages of In-Person Car Finance
- Time and Effort: Securing financing through dealerships involves travel, fuel and time. The likelihood is that you won’t find your dream car or finance terms at the first dealership, so it could take several weeks depending on your schedule.
- Limited Comparison: Unlike online financing, where you can compare numerous lenders in a flash, in-person options usually mean fewer lenders. This comes become more of a minefield for those with poor credit profiles, and few specialised bad credit dealerships exist.
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Comparing Online and In-Person: Which Is The Cheapest Option?
Online Financing Costs: With online financing, you might encounter some extra fees, especially if your credit isn’t in top shape. These could include application fees or administrative charges. Additionally, while online lenders can be more flexible for those with bad credit, it can come with higher interest rates.
In-Person Financing Costs: In-person financing often comes with its own set of fees. Dealers can add processing fees, or more commonly, markups to the financing terms – both of which raise your overall costs.
If your credit score is less than perfect, online financing might help you find lenders who are more flexible and willing to offer better terms. However, you’ll need to be vigilant about hidden fees and higher interest rates.
Which is Best: Hire Purchase or Personal Contract Purchase?
Whether you choose to finance your car through an online broker or via a dealership, you will still have to choose your preferred financing method. Understanding the differences between Hire Purchase and Personal Contract Purchase is essential to your future budget:
- Hire Purchase (HP): HP is straightforward. After paying a deposit, you’ll make monthly payments until you’ve paid off the car – reaching full ownership following the final payment. While HP means you will own the car outright and avoid any mileage limits, the tradeoff comes in the form of higher monthly payments.
- Personal Contract Purchase (PCP): PCP offers greater flexibility for car buyers. You pay a lower monthly fee, and at the end of the term, you can choose to own the car (via a final ‘balloon payment’), return it, or trade it in for a new model. This flexibility comes attached with the potentially hefty final payment to own the car, alongside restrictive mileage limits.
Car Finance Options Overview
To better understand the differences between Hire Purchase and Personal Contract Purchase, consider the example below for a Ford Puma:
| Aspect | Hire Purchase | Personal Contract Purchase |
|---|---|---|
| Car Price | £25,000 | £25,000 |
| Deposit | £5,000 | £5,000 |
| Loan Amount | £20,000 | £20,000 |
| Loan Term | 4 years | 4 years |
| Illustrative APR | 6.2% per annum | 7.9% per annum |
| Monthly Payments | £470 | £331 |
| Final Payment (for ownership) | £0-200 (nominal fee) | £8,936 (optional Balloon Payment) |
| Total Amount Paid | £22,560 | £24,493 |
| Ownership | You own the car after the final payment | Option to buy, return, or refinance the car |
*This car finance example is for illustration purposes only. Please contact our finance team for a tailored quotation.
Conclusion
If you’ve got bad credit, don’t sweat it—there are still plenty of ways to secure the car financing you need. Whether you’re leaning towards the convenience of online options or the personal touch of in-person negotiations, the key is to do your homework.
Online financing offers unparalleled convenience, a wider range of lender options, and often faster processing. However, it’s crucial not to just opt for the faster financing option, and instead weigh-up potential hidden costs and to choose an FCA-regulated broker.
Meanwhile, in-person financing offers the opportunity for direct negotiation at the expense of time and effort – in addition to more restricted lender options available.
If you’re ready to explore your options, Bad Credit Motor Finance can find you a tailored car finance quote in just 60 seconds. Reach out to our team today to kickstart your journey towards owning your next car with confidence.
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