car-finance-top2

Car finance made easy

We make getting car finance simple so you can be on the road in no time with over 17 lenders and 70 products compared.

  • Get a free no-obligation quote - no impact to your credit file
  • Purchase any vehicle from any dealer or privately
  • Don’t pay broker fees - transparent process
  • Found a car? Check the history & value for free
Price calculator

Car finance calculator

I would like to borrow
£1,500
To pay back over
3.5 years

Representative Example: Borrowing £5,500 over 48 months with a representative APR of 19.8%, the amount payable would be £163 a month, with a total cost of credit of £2,283 and a total amount payable of £7,783.

Does car finance count as a loan?

Personal finance is a complicated area – and it’s sometimes difficult to understand the differences between the enormous range of finance products that are on the market at any one time. 

Since lots of Car.co.uk customers ask whether or not car finance is a personal loan, we’ve explored the subject in a little more detail here.

Different types of car loan

Generally, the reason people want to know whether a car finance agreement is considered a loan comes down to how banks and other finance organisations consider their financial health.

When a finance product is ‘secured’ against something (often a house, a car, or another large purchase), it’s considered to be less of a risk than a product that has no security.

Why? 

Well, it’s all about how likely the bank or finance company are to get back what’s owed to them if repayments stop for any reason. For instance, if you lost your job and could no longer pay a secured car loan, then the finance company would look at recovering the car, selling it, and settling the outstanding debt that way. On the other hand, if you used a personal loan to buy the car, the finance company would have to explore debt recovery routes or set up a repayment plan with terms less favourable to them to get as much money back as possible.

So clearly, the risk involved with a personal loan is greater. What’s more, a personal loan could have some element of the overall repayment amount written off altogether if someone runs into financial problems and explores insolvency proceedings – like an Individual Voluntary Agreement (IVA).

Different lines of credit

Since different types of finance product come with different levels of risk, banks will generally limit the amount you can borrow using each product. For instance, you might have no problem getting a mortgage for £100,000 – but getting a personal loan for the same amount is likely to be much more difficult. 

The limits that are decided will depend on your personal circumstances – but secured products tend to have higher limits, as the risk is lower.

Is a car loan a secured loan?

Whether or not your car loan is a secured loan will depend on the product you’ve picked in the first place.

Many types of car finance are secured, including:

  • Personal contract purchases – also known as ‘PCP’ or ‘personal contract plans’
  • Hire purchase plans – also known as ‘HP’
  • Personal contract hire – also called ‘contract lease’ plans
  • Logbook loans – generally not a way of purchasing a car, instead, usually a smaller loan that’s secured against your vehicle

With these products, falling into arrears may lead to your car being recovered by the finance company and sold to recoup their losses. 

On the other hand, if you’ve opted for a personal loan, you’ll find these are not usually secured against your vehicle. Since lenders will consider there to be an upper amount you can borrow as a personal loan, this often means your borrowing power is limited if you need further personal loans – but it does mean you’ve got a lot more flexibility when picking a car.

Personal loans offer greater flexibility because the finance company will not be relying on your car to get their money back should you run into problems. As such, personal loans are often a better choice if you’re looking at buying an older car, a classic, or an imported vehicle.

Other related FAQs

Looking for more related content to this? We’ve picked a selection of related topics that you may find helpful

A guarantor car loan is an agreement in which a third party (usually a family member or friend) agrees to guarantee the repayment of your loan if you fail to keep up with your payments.

Car finance agreements don’t tend to include insurance as standard, but there are packages available that do.

Car finance agreements can be a great option for a wide range of people. Before committing to a deal though, it’s always important to read the terms carefully and consider the pros and cons.

Car finance companies don’t usually contact employers to assess eligibility. However, in some circumstances, they might.

Yes, certain lenders will consider offering finance for a vehicle that is sold privately.

In general, you cannot simply transfer a car finance agreement to someone else. However, there may be other options available to you that meet your needs.

Don’t worry if you can’t remember who your car finance is with. You can find out by checking your paperwork, looking at who you make your payment to through your bank, or calling the dealership you bought your car from.

Car loans can be secured or unsecured, depending on the type of agreement you get.

The simplest way to find out how much is left on your car finance agreement is to contact your lender. Alternatively, you can calculate this figure yourself.

Your ‘settlement figure’ is the amount that the car finance company require to pay off your finance in full. Since this changes as interest is added and as payments are made, requested settlement figures are usually only valid for a short time.