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Automatic car finance


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[1] Correct as of June 2024.

What is automatic car finance? 

With car finance for automatic cars, you can borrow the money you need to buy an automatic car and then pay off what you owe in monthly repayments over a fixed term.

Car finance can help you pay for an automatic car that you wouldn’t otherwise be able to pay for upfront. However, you’ll normally pay interest on the money you borrow, so paying for an automatic car on finance could mean it’ll cost you more overall. 

Most automatic car finance deals also require you to put down a proportion of the car’s cost as a deposit.

Types of automatic car finance

There are three main ways to finance an automatic car:

Hire purchase

With hire purchase (HP) car finance, you’re essentially hiring the car while you pay it off in fixed monthly payments. Once you’ve made the last repayment, pay the final ‘option to purchase’ fee and the car will be yours to keep. 

Under an HP agreement, the automatic car you’re buying is used as security for the loan. Fail to make the repayments and the car can be repossessed. 

Personal contract purchase

With personal contract purchase (PCP) car finance, you’ll only pay off what the lender predicts the automatic car will lose in value over the length of the agreement. 

Because you’re not paying off the full value of the car, your monthly repayments should be lower than a HP agreement on the same car. At the end of the deal, you can either:

  • Make a large final payment to own the car
  • Give the car back
  • Use any equity you’ve built up as a deposit on a new PCP deal. 

Personal loan

With an unsecured personal loan, you can borrow the money you need to buy an automatic car outright and then pay it off over the term of the loan in fixed monthly repayments. 

Unlike most HP and PCP car finance, with a personal loan you won’t have to pay a deposit. You’ll also own the car immediately. However, you’ll need a good credit rating to be approved and take advantage of the best rates.

Which is better: automatic or manual? 

There are advantages and disadvantages to both automatic and manual cars, and which is better for you will come down to your personal preferences and circumstances.  

Although manual cars have traditionally been preferred by UK drivers, and two-thirds of cars on UK roads still have a manual transmission, that trend is shifting. In 2021, 62.4% of new cars sold were automatic, according to data from The Society of Motor Manufacturers and Traders (SMMT). 

Fewer new car models now come with manual gearboxes, as car manufacturers prepare for the UK’s ban on new petrol and diesel cars from 2035. Because electric cars don’t have a gearbox and are all effectively automatic, manual cars may become a relic of the past in the not-so-distant future.  

Advantages of automatic cars

  • Easy to drive – with no clutch to control or gears to change, many people find automatic cars simpler to drive
  • Focus more on the road – not having to change gears manually could mean you devote more of your attention to your speed and position on the road, as well as potential hazards
  • Efficiency – modern automatic cars can keep up with – or in some cases outcompete - manual cars when it comes to fuel efficiency.

Disadvantages of automatic cars

  • More expensive – both new and used automatic cars tend to be more expensive to buy
  • Not as exciting to drive – it’s subjective, but some drivers think that driving an automatic is less interesting and don’t like having less control over their car
  • Tricker to repair – because automatic transmissions are more complex, they can be more expensive to repair if something does go wrong.

How much does automatic car finance cost?

The cost of automatic car finance depends on several factors, including:

  • The value of the automatic car you’re financing
  • How much deposit you’re able to pay upfront for the car and how much you need to borrow
  • What type of car finance agreement you choose – whether that’s HP, PCP or a personal loan
  • What interest rate you can get, based on factors such as your affordability and credit score
  • How long you choose to pay back the loan – the longer the term, the more you’ll pay in interest
  • What fees are charged by the lender – this should be included in the APR. 

The cost to finance an automatic car also varies depending on the lender. Shopping around is one way to compare what’s out there and make sure you’re getting a good deal. 

You can also use our car finance calculator to see how much your monthly repayments could be and how much you could pay back overall depending on the loan term and APR.

Can I get automatic car finance with bad credit?

You may qualify for automatic car finance with bad credit, but your options could be limited, and it may mean you’ll be able to borrow less. Your credit score will also influence the interest rates you’re offered, and with bad credit, you can expect to pay a higher APR on the money you borrow. 

If you’ve missed payments in the past or you’ve not yet had a chance to build up much of a credit history, paying for your car on finance or taking out a bad credit loan for a car could help you to build or improve your credit score

But that’s only true if you’re able to show that you can handle debt responsibly. Make sure you can afford the repayments, otherwise you risk causing further damage to your credit score.

What do I need to apply for automatic car finance?

First, you’ll need to get to grips with what type of automatic car finance you’re looking for and what you can afford to borrow. Once you know what you’re looking for, it’s a good idea to see what car financing deals are available to you and compare your options. 

We’ve partnered with leading car finance broker Car Finance 247 to help you compare your options from their panel of providers. To get a personalised quote, simply fill in their application form and you’ll see what’s available in minutes. They’ll just need to know some details about you, your job, and the type of car you’re looking to buy. 

They’ll use a soft credit check to see if you’re eligible, so it won’t affect your credit score. If you’re approved in principle, you’ll be paired with an account manager who can talk to you about your options and walk you through the rest of the process.

Automatic car finance – the key points

  • There are more and more automatic cars available to buy on the UK market
  • There are three main types of automatic car finance deals to consider: hire purchase (HP), personal contract purchase (PCP) or a personal loan
  • With car finance, you’ll typically pay for your automatic car in fixed monthly instalments over a set period, but make sure you factor in any additional fees or payments charged by the lender
  • You’ll normally pay a deposit for HP and PCP car finance, although you may be able to find car finance deals with 0% deposit
  • Your credit score will affect the deals and rates you’re offered for automatic car finance.

The content written in this article is for information purposes only and should not be taken as financial advice. If you require support on the products discussed here, please speak to your bank/lender or seek the advice of an independent professional financial advisor. We also have more information on our Customer Support Hub.

Frequently asked questions

Do automatics use more fuel?

The fuel efficiency of an automatic car depends on factors like the type of automatic gearbox it has, as well as the engine size and fuel type. There are also several other things that can influence the fuel efficiency of any vehicle, including your driving habits and how laden your car is.

Automatic cars previously tended to use more fuel than manuals, but modern automatic transmissions offer more efficient gear selection and changes. That means they can match or even outcompete some manual cars in fuel economy.

Are automatic cars more expensive to insure?

Automatic cars do tend to cost a bit more to insure. Automatic cars could cost more to buy, and automatic gear boxes can cost more to repair. Insurance providers will factor in these potential higher claim costs when deciding on your premium.

However, the price you’ll pay for automatic car insurance depends on the type of automatic car you drive along your individual circumstances, including where you live and how much you drive.

Will I pay a higher interest rate for automatic car finance compared to manual car finance?

Whether or not you’re buying a manual or automatic car shouldn’t really affect the interest rate you pay for car finance. Interest rates vary between lenders, but they’re normally based on factors such as the type of car finance you choose, your credit history and individual circumstances, and how much you’re borrowing.