Understanding Car Finance

Buying a car with finance can seem complicated so here’s a quick guide to help.

How does Halifax Car Plan Extra work?

We’ve tried to keep it simple throughout and make sure this works for you whether you’re just browsing, or you’ve found the car your want

1: Calculate

1: Calculate

Use the simple online calculator to understand the options available to you.

By inputting the amount you aim to spend, the deposit you have and the length of term you’re interested in you can see what repayments on Hire Purchase (HP) and Personal Contract Purchase (PCP) look like.

Get an instant decision online without impacting your credit score.

2: Get a decision

2: Get a decision

Once you know the details for the car you want you can get an accurate illustration. If it’s a used car, you’ll need the registration number and current mileage. If it’s a new car, you’ll need the delivery date as well as the make and model.

If you’re happy with this you can complete the application online.

To do this you’ll need to tell us:

  • Some details about your income and spending
  • Your expected mileage
  • The post code (and later the bank details) of the dealership you’re intending to buy from

We’ll then email you all the documents you need to agree to the finance offer and complete the application.

3: Complete

3: Complete

You’ll need to speak to the dealership directly to agree final price, any part-exchange you might be arranging with them and when your new car will be ready for collection.

Once that’s all agreed, just sign back in to Car Finance within Online Banking, enter the dealerships bank details and we’ll send the money directly to them.

Once they’ve confirmed receipt of the money you can arrange to pick up your new car.

The calculator will probably show you a different offer once you input a specific car.

Before you know the car you want to buy we can show you Hire Purchase (HP) and Personal Contract Purchase (PCP) options based on the information you give us (price of car, length of term, amount of deposit). We make this calculation using an average vehicle depreciation for the value of the car you’ve indicated. While this can’t be guaranteed until you confirm the car details, it should be very close.

Once you confirm the car you’re buying we can take a more detailed view of its value and likely depreciation over the term you’ve chosen. We can then show you an actual illustration which is specific to your chosen car.

Why does depreciation matter?

Depreciation means the amount of value your car will lose over a given term.
The Personal Contract Purchase (PCP) gives you the option to pay a lump sum at the end of your term in order to own the car. To provide an accurate lump sum, we need to calculate the likely value of the car at the end of the term.

Not all cars depreciate at the same rate - The make and type of car you choose will impact the offer you receive.

Two cars costing the same to buy, might not be worth the same at the end of a 3 year term. For example:
Car A purchased for £23,000 could be worth £10,000 after 3 yrs.
Car B purchased for £23,000 might be worth £12,000 after 3 yrs with the same mileage as Car A.

This could be due to brand, specifications or differences in market value. In this example, Car B depreciates slower than Car A (i.e. retains a higher market value for resale) and will result in lower monthly payments and a higher lump sum on a Personal Contract Purchase (PCP) than Car A on the same plan.

How do you compare finance offers like-for-like?

Different interest rates and terms will affect the total amount payable - a lower interest rate over a longer term may give lower monthly payments but by paying for longer you could end up paying more overall. The total amount payable lets you compare offers like-for-like as this figure shows you what it will ultimately cost you to buy your car.

Lending is subject to status and additional affordability checks. You must be aged 18 or over, be a UK resident, be registered for online banking and have held a Halifax personal current account for a minimum of 3 months.