Car Finance vs Personal Loan. What’s the Difference?

Car finance is specifically designed for the purpose of purchasing a vehicle, while a personal loan can be used for a variety of expenses. Car finance often has more flexible terms than a personal loan, making it a better option for purchasing a car. Additionally, some car finance options allow the borrower to use the car as collateral, which can also lower the interest rate and increase the chances of approval.

Buying a car is a big investment and the decision of how to finance it can have a significant impact on your finances in the long term. While both car finance and personal loans offer different ways to pay for your car, it is important to understand the advantages and disadvantages of each option so you can make an informed decision.

Advantages of Car Finance:

Lower Monthly Payments: Car finance usually offers lower monthly payments than personal loans, making it more affordable for some people. This is because the loan is typically secured against the car, allowing the lender to spread the cost over a longer period.

Fixed Interest Rates: Many car finance deals come with fixed interest rates, meaning you know exactly what you’ll be paying each month and won't have to worry about fluctuations in interest rates.

Easy Process: The process of obtaining car finance is often straightforward and can be completed in a matter of minutes, making it a quick and convenient option.

Option to Trade-in: With car finance, you have the option to trade-in your old car for a new one when your finance deal ends. This can help reduce the cost of your next car.

Disadvantages of Personal Loans:

Higher Monthly Payments: Personal loans often have higher monthly payments than car finance, as the loan is typically paid back over a shorter period.

Higher Interest Rates: Interest rates on personal loans can be higher than those offered by car finance, so you may end up paying more in interest over the life of the loan.
Get a quick decision on your car finance

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Andy Ryan
Andy Ryan
Absolutely outstanding service from Damian at Happy Motor Finance, start to finish 48 hours everything was explained and was an easy process. Highly recommended and cheers Damian much appreciated!
Victoria Sumner
Victoria Sumner
Amazing service from Leon and a new car sorted in less than a week.
Peter Killiard
Peter Killiard
I could make this very very long winded but I won’t. I’ll just say that Kirsty and the team gave me the best customer service and buying experience ever. Thank you very much and I’ll be back when it’s time to upgrade.
Barry O'Brien
Barry O'Brien
Kirsty was very patient, I don’t think I was an easy customer, I can’t remember how many cars I looked at, there was no pressure and Kirsty was extremely helpful and nothing was too much trouble, we eventually got a great deal on my ideal car, Thank you Kirsty
Jack Scorey
Jack Scorey
Leon was great! Fast responses to questions and always happy to help. Very quick process from start to finish. I would recommend this company to anyone.
Kyle Dann
Kyle Dann
If I could give 6 stars I would, team member Yaz has been the most help from any finance company I’ve tried in getting a new car and helped me out massively. Top man and a top company would massively recommended.
leah wilson
leah wilson
Everything was quick and easy! would 100% recommend to anyone looking to quick finance!
LGA-Extra Z
LGA-Extra Z
Fast and easy service. couldn’t ask for a better service
lizzy smith
lizzy smith
Kirsty was extremely helpful, really helped me understand everything and got me the best deal possible! Also very easy to chat to and get along with! Highly recommend!
Some of our trusted partners
Oodle - Car Finance Loan Lender
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Advantage Finance - Car Finance Broker Partner
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Close Finance - Motor Finance Partners
First Response Car Finance Broker Partner
Company Name & Contact Details
Happy Motor Finance
Clippers House
Clippers Quay
M50 3XP
0161 524 0582
Happy Motor Finance Limited is registered in England and Wales under company number: 14387669. Registered office address: Clippers House, Clippers Quay, Salford, England, M50 3XP

Happy Motor Finance Limited (FRN - 989250) is authorised and regulated by the Financial Conduct Authority. We act as a credit broker not a lender. We work with a number of carefully selected credit providers who may be able to offer you finance for your purchase. (Written Quotation available upon request). Whichever lender we introduce you to, we will typically receive commission from them (either a fixed fee or a fixed percentage of the amount you borrow) this will not affect the rate you are offered or the amount you will pay back. The lenders we work with could pay commission at different rates. All finance is subject to status and income. Terms and conditions apply. Applicants must be 18 years or over. We are only able to offer finance products from these providers.

Happy Motor Finance Limited are registered with the Information Commissioners Office under registration number: ZB408604

VAT Number: 456 0212 21