Is car finance worth it?

Yes, car finance can be worth it if it helps you buy a car you need without straining your budget.

Instead of paying the full cost upfront, car finance allows you to spread the payments over time, making it easier to manage your money. Most cars in the UK are now bought on finance, with many lenders offering low-interest options. Before you commit, it’s important to understand how each type of finance works and what it means for your total costs.

When is car finance worth using?

When you need a car but can’t pay for it all at once

You can spread the cost into monthly payments, which makes it easier to manage. And while you’ll usually need a deposit (an upfront payment), it’s much lower than paying for the whole car straight away.

It’s also a good option if you want a better car than your budget allows. Finance can help you get something newer or more reliable without waiting to save up. But you should always make sure the monthly payments fit your budget.

If you can comfortably afford the monthly payments

You’ll need to show the lender that you can pay using your regular income. And it helps if you know exactly how much you can put towards car payments each month.

A clear budget makes the decision easier. If you have money left after covering your other costs, finance could be a good way to get a car without using up your savings. But the agreement should always fit your lifestyle and income.

If your best option is a car finance deal with a low-interest rate

The interest rate (the extra cost you pay to borrow money) affects the total amount you’ll repay. If your credit score is strong, you’re more likely to get the best rates from lenders.

It’s worth comparing different offers before you apply. You can look at car finance options and personal loans side by side to see which is cheaper overall. And if your credit score isn’t perfect, car finance may still be more affordable than an unsecured loan, since the car acts as security.

If you like to switch your car frequently

Car finance is ideal if you like changing your car every few years. PCP (personal contract purchase) lets you return the car at the end of the term and take out a new deal. You don’t have to worry about selling the car or dealing with depreciation.

Leasing is another good option if you don’t want to own the car. With PCH (personal contract hire), you hand the car back at the end and start fresh with a new one. And while HP (hire purchase) is available, it’s better for people who plan to keep the car long-term.

When is car finance not worth it?

The following instances explain when it may not be worth obtaining car finance.

If buying a car outright is within your financial means

Buying a car with cash makes more sense if you can afford it. You won’t pay any interest, and you’ll own the car from day one. That means no monthly payments, no finance charges, and no long-term commitment.

It’s a smart choice if you plan to keep the car. If you’re happy driving the same vehicle for years, paying upfront often works out cheaper in the long run. And you’ll avoid extra costs linked to mileage limits or damage charges.

If a bank has given you a personal loan at a lower interest rate,

A personal loan with a lower interest rate can be cheaper than car finance. If you have a strong credit score, banks may offer you better rates than those available through car finance providers. That means lower monthly payments and less interest overall.

Use a free eligibility checker before you apply. It shows you what rates you might get without affecting your credit score. And it helps you see if a personal loan works out better for your budget than a finance deal.

If you want to be the owner of your car from the beginning

Car finance might not be right for you if you want to own the car outright from day one. With most finance agreements, the car belongs to the lender until the final payment is made. That means you can't sell it or make major changes during the term. If full ownership is important to you, it may be better to use your own funds or take out a personal loan. This gives you complete control over the car, with no restrictions on mileage, usage, or modifications.

If you might not be able to keep up with the monthly payments

Car finance isn’t a good idea if you’re unsure about making the monthly payments.  You need to be confident that you can afford the full cost of the agreement from start to finish. If you miss payments, your credit score will drop, and the lender could take back and sell the car. And if your income might change, it’s safer to wait until your finances are stable. You can sometimes lower your monthly cost by choosing a cheaper car, paying a bigger deposit, or extending the loan term, but you should only go ahead if the payments still feel realistic for you.

What to consider when applying for car finance

Before you apply for car finance, make sure it’s the right move for you. Ask yourself these six key questions:

• Can I afford the monthly payments?
  Check your income and expenses to see if the repayments fit your budget without causing stress.
  
• Is my credit score strong enough?
  Lenders use your credit history to decide your interest rate. A better score usually means a cheaper deal.
  
• Do I really need a new car now?
  Think about why you’re upgrading. If your current car still works well, it might be worth waiting.
  
• Will I use the car often enough to justify it?
  If you drive rarely, a cheaper or second-hand option could make more sense.
  
• Do I tend to damage or neglect my cars?
  If so, consider that you could face extra charges at the end of a PCP or lease deal.
  
• Does this finance agreement suit my plans?
  Make sure the type of finance matches your goals, like owning the car or changing it regularly.
  

Is financing a car a good idea? contact our brokers

If you’re still unsure if car finance is right for you, our expert brokers at Carplus are here to help. We support drivers across the UK by offering clear, honest advice tailored to your needs. You’ll get guidance on the best options based on your budget and goals, and we’ll walk you through each step of the process. Get in touch with a Carplus broker today and we’ll help you make the right choice with confidence.