Is car finance easier to get than a loan?

Car finance may be easier to get for some people, especially if your credit history isn’t good. With car finance, you could be matched with a lender who specialises in helping people with bad credit explore car finance. Personal loans usually have stricter credit requirements, so it might be harder to get approved if your credit score needs work. Credit is subject to status.

Which is better, car finance or bank loan?

The right choice depends on your circumstances. A bank loan gives you immediate ownership and complete freedom to drive or sell the car. Car finance could offer lower monthly payments and more flexibility, especially with PCP, where you can return, trade in, or keep the car at the end.

Can I use a personal loan to buy a car?

Yes, you can use a personal loan to buy a car from either a dealership or a private seller. The loan funds go into your account so you can purchase the car outright, then you repay the loan in monthly instalments.

Can I get PCP car finance instead of a loan?

Yes. PCP can be a great option if you want lower monthly payments and flexibility at the end of the deal to return, trade in or buy the car. A personal loan gives you immediate ownership instead, so the best option depends on your needs and budget.

What is the difference between PCP and a bank loan?

PCP monthly payments are usually lower because they’re based on the car’s depreciation, but you’ll have a final balloon payment if you want to keep the car, and mileage limits may apply. A bank loan gives you full ownership from day one and comes with fixed payments but no mileage limits or balloon payment.

How do repayments work for car finance vs a bank loan?

With car finance, monthly payments depend on the type of deal. HP means paying off the full cost to own the car at the end, while PCP offers lower monthly payments with a larger final payment if you want to keep it. With a bank loan, you borrow the full amount upfront and repay it in fixed instalments, and the car is yours from day one.

Car finance or a bank loan: What should you choose?

Written by Louise Haines Updated 21 Nov 2025

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If you can’t afford the cost of a car upfront, you may be debating whether to get car finance or a bank loan. Both options mean spreading the cost of a car over a number of set payments, which could make owning one more manageable.

But they work in different ways, and it’s important to understand the pros and cons so you can make the right decision for your budget and financial situation. So, here’s everything you need to know about car finance vs bank loans.

Banks vs brokers vs dealerships for finance

What is car finance?

Car finance is a way to buy a car without paying the full price all at once. Instead, you agree to make monthly payments over a set period. The lender owns the car while you’re paying it off, but you use it as if it’s yours. Once you’ve paid off the loan (and any final payment if needed), ownership transfers to you.

At Car Finance 247, we work with a panel of trusted lenders who could offer different types of car finance, including:

Personal Contract Purchase (PCP) – With PCP, you make monthly payments over a set loan term based on the car’s expected depreciation, plus interest. At the end of the loan, you can either give the car back, trade it in or pay what’s known as the ‘balloon payment’ to keep the car.
Hire Purchase (HP) – In a HP agreement, you also pay monthly, plus interest. But, you pay off the full amount of the car. So, once the final payment is done and the loan is complete, the car is yours.
Bad Credit Car Finance – Some of our trusted panel of lenders may offer bad credit car finance, which is designed for people who have struggled with credit and may not be approved by traditional lenders. However, approval isn’t guaranteed, and credit is subject to status.
Refinance – Refinancing your car means paying off your current finance agreement with a new one. This could give you the chance to get lower monthly payments or a better interest rate. However, extending the length of your term to reduce your monthly payments can increase the total amount repayable.

What is a bank loan?

A bank loan is when you borrow a set amount of money from a bank or building society to buy the car outright. You pay it back in monthly installments with interest.

Unlike car finance, with this type of personal loan, you own the car from day one, and there are no mileage limits or restrictions from the lender. But, there are pros and cons to both. Car Finance 247 don't currently offer personal loans, but let’s look at the difference in more detail.

How is car finance different from a personal loan?

When comparing car finance or loan options, there are several differences you may want to keep in mind:

Ownership from the start of the agreement: With a personal loan, you own the car immediately as soon as you buy it. With car finance, the lender owns the car until you’ve completed all the payments (and made any final payment if your deal has one).

Paying a deposit: Some car finance deals require you to pay a deposit upfront, which could reduce your monthly payments as you are borrowing less. Personal loans usually don’t need a deposit; you borrow the full amount you need and own the car straight away.

Fixed monthly payments: Both options come with set monthly payments. With finance, your payments could sometimes be lower at the start (for example with PCP), but may include a final “balloon” payment at the end. A personal loan usually spreads the cost evenly across all months.

Buying privately: Personal loans give you the freedom to buy a car from a private seller. Finance deals are mostly through dealerships, so this option is less common if you want to buy privately.

Buying from a dealership: Both finance and personal loans let you buy from a dealership. The difference is that finance agreements are usually arranged through the dealer or broker, while a loan is separate; you pay the dealer directly.

Mileage restrictions: Some finance agreements, particularly PCP, include mileage limits. If you go over the limit, you may face extra charges. Loans don’t have any mileage restrictions, so you can drive as much as you like.

Finance structure: Car finance is usually secured against the car, meaning the lender can take it back if you don’t keep up with payments. Personal loans are generally unsecured, so the lender can’t take the car, but they may pursue other ways to recover money if you miss repayments.

Car finance or loan at a glance:

Feature	Car finance	Personal loan
Ownership from start	No	Yes
Deposit required	Often	No
Fixed monthly payments	Yes	Yes
Buying privately	Not usually	Yes
Buying from a dealership	Yes	Yes
Mileage restrictions	Sometimes (e.g. PCP)	None
Finance structure	Secured against the car	Unsecured loan

Pros and cons of car finance

Pros:

Spread the cost: You don’t need to pay the full price of the car upfront, which could make it easier to afford a car and get the make and model you want.
More flexible ownership options – If you’re unsure of whether you want to keep the car, deals like PCP give you more choices and you can decide at the end.
Quick and convenient – It could be a bit daunting buying a car privately. Going through a broker like Car Finance 247 could make life easier.

Cons:

You don’t own the car straight away – Until the agreement ends, the car belongs to the lender.
Can cost more overall – Interest rates might be higher than personal loans, especially if your credit score needs work. However, you may be more likely to be approved with a specialist lender, subject to status.
Possible extra charges – Going over the set mileage limits, returning the car in poor condition, or missing payments could end up costing you on top of your monthly payments.

Pros and cons of a personal bank loan

Pros:

Immediate ownership – With a bank loan, you own the car from day one and don’t have any restrictions.
More buying freedom – You could use your loan to choose any car you like from any seller.
Sometimes cheaper – If you’ve got a good credit score, a personal loan might offer a lower interest rate than a finance deal, which could save you money overall.

Cons:

Higher credit requirements – Banks may look for a good or excellent credit history, so it might be harder to get approved if your credit is poor.
No ownership flexibility – Unlike finance deals with options at the end, a personal loan doesn’t give you the option to hand the car back or trade it in.
Takes more effort – You’ll need to apply for the loan yourself and then arrange the car purchase separately, which could take a bit more time and effort on your part.

What is the best option for you?

Choosing between car finance or a bank loan depends on your financial situation, your credit score, and what you want at the end of your loan.

Here are the key points you may want to consider:

Monthly budget: Car finance can sometimes mean lower monthly payments than a personal loan because the deal is secured against the car. But once you factor in interest, it could cost more overall. Think about whether you’d rather save money month-to-month or in the long run.

Credit score: If you’ve got a good credit score, a personal loan could offer lower interest rates and save you money. But if your credit history isn’t perfect, car finance might be easier to get. Some lenders specialise in helping people with bad credit, though rates can be higher, and credit is subject to status.

Your preferred car: A personal loan gives you more choice because you can buy from a private seller or any dealer. With car finance, you may be limited to certain dealers or cars that meet the lender’s criteria.

Mileage limits: PCP finance deals often come with mileage caps, and going over can mean extra charges when you hand the car back. With a personal loan, there are no mileage limits, so you can drive as much as you like.

Whether you want ownership: With a personal loan, the car is yours from day one. With HP, you’ll own it once all payments are made. PCP offers more ownership flexibility – you could hand the car back, trade it in, or buy it outright at the end of the deal by paying the ‘balloon payment’.

Am I eligible for car finance or a bank loan?

Requirements may be similar for both car finance and a personal loans, and could include:

● You need to be at least 18 years old.

● You must be able to show you can afford the repayments.

● You must pass the initial credit check and affordability assessments.

But remember, the specific eligibility requirements you need to be accepted will differ by lender and credit is subject to status and eligibility.

You could get a good idea of loan terms by using our quick and easy car finance calculator.

The takeaway

Choosing between car finance or a bank loan really depends on your budget, credit score, and what you want from your car. If you’d rather keep your monthly payments lower or like the idea of changing cars every few years, finance could be a good fit. But if you want to own the car straight away and have fewer limitations, a bank loan might make more sense.

Whatever you go for, take a bit of time to compare deals and think about what works best for your situation. For more tips and guides, have a look at our other guides and blogs like our complete guide to personal loans and the cheapest way to finance a car.

Disclaimer: Car Finance 247 Limited is a broker, not a lender. Finance is subject to status and affordability checks. Terms and conditions apply. We do not offer financial advice. Please make sure you understand your agreement before signing.