Car finance deals explained
Choosing the right car finance deal for you
by Abi Moses on 23rd June, 2017
Are you searching for your new car? Finding the right car can be a long and challenging journey, but deciding how to pay for it can certainly be a lot tougher and incredibly stressful. You may have your eye on a particular motor for your weekend get-a ways, or you may just want something for your daily commute to work. Whichever option sounds most like you, we know how tricky it can sometimes be to make a decision like this, especially as finance agreements often come with a vast amount of paperwork. So, to make the process a little easier, we at Car Finance Deals have put together a few tips on car finance payment options to help you weigh up your pros and cons.
· Dealer finance
There are three main types of finance that a car dealer is likely to offer you
1. Hire purchase (HP)
This option is secured against the vehicle itself, and you do not or will not own the car until you have made the very final finance payment. Also, you can’t sell the car without the lenders permission, however you can return it. You usually need to pay an upfront deposit to enter into this agreement, and then repay the balance in instalments over the loan period. At the very end of the loan, you will own the car outright.
2. Personal contract purchase (PCP)
This usually involves paying an upfront deposit and then low monthly instalments over a fixed period of time. At the end of the deal, you can choose to either pay a lump sum to purchase the car, return the vehicle, or choose to sell it privately in order to pay off the remainder.
3. Personal leasing (contract hire)
This is similar to a PCP, with low monthly payments. However, you have no option to buy the car. This choice is convenient because at the end of the agreement it is easy to change the car.
· 0% finance deals
It’s often that 0% finance deals are offered to whom the dealer thinks are applicable. This option is to usually shift a slow-selling model, but can work out affordable due to its no interest charge on your monthly payments. However, bare in mind that this option usually requires a large deposit of 35% or more.
· Additional extras.
Dealers can make commission from adding additional insurance and other products to your motor package and finance plan. These extras may include:
1. Gap insurance or ‘asset protection’
2. Minor damage insurance.
Whichever car finance deal you are thinking of out of this list, make sure you recognise the pros and cons whilst taking some time to consider whether it’s the right option for you. Average finance contracts are signed for a minimum of three years, so you need to ensure that you are secure enough to support your choice.
For more car finance deals and tips, take a look at our other news and blogs at, http://carfinancedeals.ltd.uk/blog.