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Financing Your Car

Not sure what is the best finance for you? There are many ways to purchase your dream car without paying an initial lump sum. Car financing allows you to spread the total cost of the car across an agreed period of time. Each financing option works a little differently. The car finance option best for you will depend on whether you want ownership of the vehicle.

Personal Contract Purchase (PCP)

After an initial deposit and fixed monthly instalments, a new car could be yours to drive. You can decide on the contract terms. You will decide the mileage amount at the start. At the end of the contract, you won’t have ownership of the car. However, you have the option to buy the vehicle and own it. You will have to pay a ‘balloon payment’. But you have no obligation to purchase the vehicle. The second option is to walk away from the contract and hand back the car, provided it’s in good condition. You are also able to choose the length of the contract. PCP monthly payments are lower than those of Hire Purchase (HP) payments.

Hire Purchase (HP)

In a HP contract, you will pay an initial deposit. The finance company will then loan you an amount to pay for the car. You will pay the loan back to the company through monthly instalments, after this you will own the car. The deposit and monthly payment amounts will depend on the cost of the car, interest rates and length of agreement.

Leasing (Personal Contract Hire)

With Leasing, you will pay an upfront sum and then follow up with regular monthly payments. Similarly to a PCP contract, you won’t own the vehicle. Resulting in mileage caps, and wear and tear fines. Within your contract, you can add services to it. Including tyres, servicing and other extras. Thus, your monthly payments will increase. However, you can’t purchase the vehicle at the end of your contract.

Bank Loan

Otherwise known as a personal loan. This method of car finance allows you to have outright ownership of the car. You are able to sell the car whenever you want. The terms of repayment is dependent on the bank/company in which you loan from.

Before signing the dotted line, make sure the loan is affordable for you. Take into consideration as to whether your financial circumstances may change in the future. Having a conversation with your dealer about finance can help you choose the right option for you.

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