How to find cheap car finance: our insider tips

  • Search for low APR charges and high deposit contribution discounts for the best value finance
  • Place a larger deposit to cut interest charges - the more you put down, the less interest you pay
  • Be aware that not all dealer finance is good value - compare the cost of different funding formats

It’s hard to walk into a dealership without being bombarded with different finance options. However, not all car finance deals provide good value.

While some brands offer interest-free finance, attractive discounts and throw in extras like free servicing, others will sting you with high APR charges plus steep 'first credit arrangement fee' and 'option to purchase' bills.

To make sure you get a great deal it’s worth doing your homework, as this will help you avoid being locked into an expensive contract that could cost you thousands in interest and fees.

Keep reading to find out how to get the most for your money and check out our how to get the best car finance deal guide. Meanwhile, you can find out how much you can afford to borrow with the Parkers car finance calculator

If you're in the market for a new car right now take a look at our roundup of the best PCP finance deals available:

Focus on low APR PCP finance deals

All PCP finance quotes should display an APR charge and that gives you a good indication of how much interest you'll end up paying; the lower the figure, the less you'll have to shell out.

Cheap PCP car finance

Manufacturers often hide high overall costs in large deposits and long contracts, which artificially make your monthly payments look more affordable, but APR charges should give you a clear idea of how much of a premium you're paying for paying in instalments.

Numerous car companies offer 0% APR deals, letting you spread the cost of a car over a deposit, a series of monthly payments and an optional final payment – with no interest charged for the privilege.

Others, however, may charge as much as 9.9% APR for a brand new car or even 20% or more for a used one. Get shackled into one of these contracts and you could find yourself spending thousands in interest alone.

Cheap PCP car finance

The longer the finance term, the more the interest racks up, too. Similarly, unless you've secured a 0% APR deal, the lower the deposit you pay, the more you'll have to stump up overall, since interest is being applied to a large value.

Large deposit contributions can more than outweigh interest charged

Potentially more important than the APR charge, though, are deposit contribution discounts.

If the saving is large enough, this can more than cancel out interest charges, meaning that not only is there effectively no interest to pay, but you actually save money compared with paying cash.

Cheap PCP car finance

Better than this, a handful of manufacturers will give you a deposit contribution discount and interest-free credit on the same car. In some cases, you don't even have to put down a deposit. 

Never assume manufacturer deals offer good value

Most new car buyers may finance their car through the manufacturer, but don't think going to a dealer is a guarantee of a fair deal.

The Peuegot 108 may be one of the cheapest cars on sale in the UK, but Peugeot will charge you an extortionate 9.9% APR to finance the entry-level model meaning that you pay an enormous premium to finance it through the company’s PCP offering. 

In fact, you pay so much interest on this £9,120 Peugeot 108 that it would cost you more per month than a £12,000 Suzuki Swift with a 0% APR deal despite the near-£3,000 difference in list price.

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Check the exact interest rate for the version you’re interested in

Interest rates often vary depending on the precise version of a car, so it’s worth understanding the exact APR applied to the car you want to get.

Cheap PCP car finance

It's always wise to get quotes from several manufacturers for a handful of different models, as you can't guess the monthly payments from the list price alone; some £30,000 cars can cost less per month than other £20,000 models with like-for-like contract terms.

Adding to the complication, with some brands, the most affordable models come with the lowest interest rates, while other manufacturers offer larger incentives on pricier models – so it pays to do your homework.

For instance, while you can get an entry-level Alfa Romeo Giulietta with 0% APR, a version with a slightly higher cash price comes with 6.1% APR, making it far more expensive to finance. That high APR charge means the latter will cost you an additional £1,711 in interest alone*.

Don’t be afraid to haggle – push for list price discounts and free extras

Whatever the dealer might say, it is always worth pushing for the best deal possible with finance. With finance you can negotiate on the finance deal as well as the price of the car, though sales people might be more able to throw extras into the deal rather than slashing the price.

You're likely to get the biggest savings by pushing for a discount on the list price first, focusing on getting several extras thrown in and then making sure the finance offer is as good as it can be. Be aware that the more popular the car, the harder it'll be to get big savings.

Cheap PCP car finance

Choose a model that has been out longer, though, or is not selling very well and you should be able to push for greater discounts.

Check out our guide to how to get the best car finance deal to make sure you get a good price. Follow these tips and whatever the initial offer you're presented with you should be able to get a good car for your money.

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*Deals are correct at time of publication. Everyone’s financial circumstances are different and credit is not always available – Parkers cannot recommend a deal for you specifically. These deals are indicative examples of some packages available this week.