When I first started exploring car finance options, I was faced with a range of choices. From dealerships to banks, online lenders, and even finance companies like AA, it felt overwhelming. However, after a detailed look into AA Car Finance, I realized that it could be an ideal solution for many people seeking to purchase a car. In this guide, I’ll walk you through everything I’ve learned about AA Car Finance, from the types of loans they offer to how their terms compare with other finance options available in the market. I’ll also include some practical examples to help you understand the numbers and the process.
Table of Contents
What is AA Car Finance?
AA Car Finance is a service provided by the Automobile Association (AA), offering financing solutions for people looking to buy new or used cars. They provide personal loans with fixed monthly payments, which makes it easier for buyers to spread the cost of their purchase over time. What sets AA apart is its reputation for customer service, coupled with its flexible loan terms and competitive rates.
I found AA Car Finance to be especially appealing because of the simplicity of the process. It’s straightforward and designed for people like me who may not have extensive knowledge about financing options. What’s more, AA also offers a price match guarantee, ensuring that if I found a cheaper deal elsewhere, they would match it.
Types of Car Finance Offered by AA
One of the first things I noticed when exploring AA’s offerings is the variety of financing options available. Here’s a breakdown of the key types of car finance AA offers:
1. Personal Contract Purchase (PCP)
PCP is one of the most popular options when it comes to car finance. I found it attractive because it offers lower monthly payments than some of the other options. With a PCP agreement, I would pay for the car’s depreciation rather than the full value of the car.
Here’s how it works:
- You make monthly payments for a set term (usually 2-4 years).
- At the end of the term, you have three options:
- Pay a final “balloon” payment to own the car outright.
- Return the car to AA and walk away, providing it’s within the mileage and condition requirements.
- Part exchange it for a new car.
Example of PCP: Let’s say I want to buy a car worth £20,000 with a PCP agreement:
- Term: 36 months
- Deposit: £3,000
- Monthly payment: £300
- Balloon payment (final payment): £6,000
At the end of the term, I would either pay the £6,000 to keep the car, or I could return the car and walk away (assuming the car meets the condition and mileage requirements).
2. Hire Purchase (HP)
Hire Purchase (HP) is another option available through AA. This is a bit more straightforward than PCP. With HP, I would essentially be renting the car until I’ve paid off the entire value, including interest. There’s no balloon payment like with PCP; I simply pay for the car over the course of the loan term.
In an HP agreement, at the end of the term, I would own the car outright. I liked this option because I know from the beginning that I’ll own the vehicle once the final payment is made.
Example of HP: Let’s take the same £20,000 car:
- Term: 48 months
- Deposit: £4,000
- Monthly payment: £400
- Interest: £2,000
- Total loan amount: £20,000 + £2,000 = £22,000
Once the 48 months are up, I own the car.
3. Personal Loan
A personal loan is another way AA allows you to finance a car. It’s not tied to the car itself, meaning it’s an unsecured loan. The advantage of this is that I could use the loan for any purpose, not just for a car purchase.
With this loan, I would get the cash upfront to purchase the car, and then I would make monthly payments for a set term. There’s no need for a deposit, and the interest rates might be higher than on HP or PCP, but the loan is more flexible.
Example of a Personal Loan: For the same £20,000 car:
- Loan amount: £20,000
- Term: 5 years
- Interest rate: 7%
- Monthly payment: £400
This would mean that at the end of 5 years, I would have paid back the £20,000 loan plus £4,000 in interest.
How Does AA Car Finance Compare with Other Lenders?
To give you a clearer picture of how AA Car Finance stacks up against other options, let’s look at some key comparisons. For this example, I’ve compared AA with other lenders offering similar terms.
| Lender | Loan Type | Loan Amount | Term | Interest Rate | Monthly Payment | Total Interest | Final Payment |
|---|---|---|---|---|---|---|---|
| AA Car Finance | PCP | £20,000 | 36 months | 6.5% | £300 | £2,000 | £6,000 |
| Lender B | PCP | £20,000 | 36 months | 7.0% | £310 | £2,300 | £6,000 |
| Lender C | HP | £20,000 | 48 months | 5.0% | £400 | £2,000 | £0 |
| Lender D | Personal Loan | £20,000 | 60 months | 7.5% | £400 | £4,000 | £0 |
As we can see in this comparison, AA Car Finance offers a relatively competitive deal, especially in terms of monthly payments. However, Lender C might be more attractive for those who prefer to own the car outright without any balloon payment at the end.
Pros and Cons of AA Car Finance
Let’s break down the advantages and potential drawbacks of AA Car Finance.
Pros:
- Competitive Rates: AA’s interest rates are competitive, and they often have deals that beat high-street lenders.
- Flexibility: The three options at the end of a PCP agreement (keeping the car, returning it, or part-exchanging it) give you flexibility.
- Price Match Guarantee: If you find a cheaper deal elsewhere, AA will match it, which adds peace of mind to the process.
- Customer Service: AA is well known for its customer service, and this extends to its car finance division.
Cons:
- Higher Monthly Payments for HP: If you opt for Hire Purchase, the monthly payments might be higher compared to PCP.
- Limited Car Selection: AA Car Finance may not be able to offer the same extensive selection of cars as large dealerships.
- Interest Rates Vary: Depending on your credit score, interest rates can vary, and for those with lower scores, the rates might be on the higher side.
How to Apply for AA Car Finance
The application process for AA Car Finance is relatively simple. First, I filled out a quick online form on the AA website, which included questions about my income, employment, and credit history. Based on this information, AA gives a decision in minutes, offering a provisional agreement. After that, I was able to choose a car from their approved dealer network.
Things to Keep in Mind When Applying
Before I committed to AA Car Finance, I made sure to check the following:
- Credit Score: The interest rates depend on my credit score. Higher credit scores typically receive better terms, so I checked mine before applying.
- Affordability: I made sure that the monthly payments fit comfortably within my budget.
- Total Loan Cost: It’s important to look at the total cost of the loan, not just the monthly payments. Sometimes, lower monthly payments might mean paying more in interest over time.
Final Thoughts
After spending time exploring all the options, I found that AA Car Finance offered a solid, straightforward solution for purchasing a car. Whether you’re looking for a PCP deal with low monthly payments or a Hire Purchase agreement with no balloon payment, AA’s offerings can suit different needs. What I appreciated most was the transparency in their terms and the support available to guide me through the process.
As with any major financial decision, I recommend thoroughly researching all your options before committing. AA Car Finance is just one of many avenues, and I found that comparing rates and terms helped me make an informed decision.
