This type of finance can be used to purchase a new or used car. This is because typically you’ll have to pay a deposit of 10% of the car’s value and then pay off the balance as monthly instalments, as the loan is set against the vehicle. Although both car dealerships and brokers can arrange a hire purchase loan.
Some Positives Include:
• Firstly, you will have a flexible payment period, ranging from one to five years to suit your financial circumstances. But it is important to remember that the longer the period, the more interest you will have to pay.
• Secondly, no deposit is required.
• Thirdly, You often have the option to return the car, once you have paid off 50% of it and thus, you won’t have to commit to further payments.
• Finally, It normally comes without mileage limits.
Things To Think About:
• Until you’ve made the final payment, you won’t own the car.
• Also you are not allowed to sell or change the car in any way without seeking permission beforehand.
• Thirdly, Monthly repayments tend to be more compared to PCP and other leasing schemes.
• Lastly, It can prove costly if you only need a short-term arrangement.
This is similar to a hire purchase contract, but with PCP, you tend to have lower monthly repayments. However, it’s best to remember that the full amount payable is usually higher.
PCP works by having a loan for the difference of the car’s price at new and the anticipated value once the agreement is completed. Moreover, a forecasted annual mileage is used over the contract period.
Then once you have reached the end of the agreement there are three options to choose from:
• First of all you can trade in the car and begin the process again with another vehicle.
• Or you can simply return the car to the dealership and pay nothing.
• Finally you have the option to pay the option to purchase fee at the end of the term, which is usually the resale price and keep it.
Some Positives Include:
• Low 10% deposit
• Also you will have lower monthly payments
• As well as options to decide what to do with the car at the end of the agreement.
Things To Think About:
• Exceeding mileage limits resulting in additional charges.
• Paying extra fees for excessive wear and tear, as well as any damage.
• The total amount could be higher compared to hire purchase.
• You will also need to pay the outstanding amount if you wish to keep the car.
This type of car financing is very similar to a Hire Purchase contract, but at the end of your finance agreement, you automatically own the car. You own the car once you have completely repaid the loan, so you don’t have to give it back to the dealer, unlike HP and PCP agreements, which allow you to do so at the end.
Some Positives Include:
- Firstly, because you automatically own the car at the end of the repayment period, there are no extra fees to pay for the ownership, unlike with PCP and HP financing.
- Your monthly payments stay at a fixed rate that is agreed upon when you sign your agreement contract.
- Additionally, you can choose repayment periods that last between one to five years, making this a flexible way to finance a car.
- As a result of the car sale agreement being collateral, getting a loan for the car is easier if you have a bad credit history.
Things To Think About:
- Because you don’t have to pay any fees at the end of the repayment period, your monthly payments are typically higher than those for HP or PCP agreements.
- You only own the car once you have made the final payment, until then, it still belongs to the dealer.
- The car cannot be sold or changed in any way without permission.
- Finally, owning the car at the end of your repayment period is a big commitment and without proper research, you may regret your decision.