Question 1

What is the difference between PCP and HP car finance?

Accepted Answer

PCP (Personal Contract Purchase) has lower monthly payments but a large optional balloon payment at the end if you want to own the car. HP (Hire Purchase) has higher monthly payments but you own the car automatically when the final payment is made. PCP suits drivers who change car every 3-4 years; HP is better for long-term ownership.

Question 2

What credit score do I need for car finance in the UK?

Accepted Answer

There is no single minimum score — each lender sets its own criteria. As a rough guide: above 700 (Experian) gives access to most mainstream lenders; 580-700 limits you to near-prime lenders at higher APRs; below 580 requires a specialist bad-credit lender, guarantor, or larger deposit. Some lenders also consider thin files (little credit history) as higher risk.

Question 3

How much deposit do I need for car finance?

Accepted Answer

Most car finance deals require a minimum deposit of 10% of the vehicle price, though 0% deposit deals exist for borrowers with excellent credit. A larger deposit reduces your monthly payments, total interest paid, and the lender's risk — which can improve the APR you are offered. For bad-credit applicants, a deposit of 20% or more significantly improves approval chances.

Question 4

What is the GMFV in PCP car finance?

Accepted Answer

GMFV stands for Guaranteed Minimum Future Value — the estimated resale value of the car at the end of the PCP contract, set by the lender at the start. Your monthly PCP payments cover only the depreciation (difference between purchase price and GMFV). At the end, you can pay the GMFV to own the car, return it, or use any equity as a deposit on a new car.

Question 5

What is the average car finance APR in the UK in 2026?

Accepted Answer

Average car finance APRs in 2026 vary significantly by credit profile. For excellent credit: 4-7% APR. Good credit: 7-12%. Fair credit: 12-20%. Poor credit: 20-35%. Very poor credit: 35%+. New cars often have manufacturer-subsidised rates as low as 0-3.9% for the best-qualified buyers.

Question 6

Can I pay off car finance early?

Accepted Answer

Yes — under the Consumer Credit Act 1974, you have the right to settle any HP or PCP agreement early. The lender must provide a settlement figure within 12 working days of your request. You will also receive a statutory rebate of future interest charges. On PCP, once you have paid 50% of the Total Amount Payable, you can voluntarily return the car with no further liability under the Section 99 half-rule.

Credit Profile	Credit Score (Experian)	Typical APR Range	Example Monthly*
Excellent	750+	4% – 7%	£243 – £256
Good	700 – 749	7% – 12%	£256 – £289
Fair	650 – 699	12% – 20%	£289 – £340
Poor	580 – 649	20% – 35%	£340 – £432
Very Poor	Below 580	35% – 50%+	£432+

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