Buying a car on finance might seem like a daunting idea but in reality, there are just two simple steps you need to take. The first is deciding the type of deal that suits your requirements and there are a few different deals to choose from. We’ve taken a look at four of the most popular ones available on the market and explained them in plain English so you can make an informed decision about which is best for you.
The first step is Hire Purchase, known as HP. It is one of the simplest ways to buy a car. With an HP deal, you’ll pay a deposit of typically 10% which is then followed by fixed monthly payments. Until you have paid the final instalment and the fees to transfer the ownership of the car, it will be owned by the HP Company. This means you cannot legally sell the vehicle until this time. If you do wish to sell the car before the entire loan is paid off via the monthly instalments then you can pay the remainder in one lump sum plus early instalment fees. HP deals are ideal for those that suit a fixed monthly repayment, are looking for low-risk credit as the loan is secured only against the car, and for those that don’t mind owning the car until the whole loan has been repaid.
Next up is a Personal contract purchase, PCP which is similar to the HP in many ways, with an initial deposit, fixed rate of interest and monthly repayments over a fixed amount of time. What makes a PCP different from an HP is that at the end of the loan term you can do one of three things, return the car, keep it or trade it for a replacement, with each option having its own benefits. The PCP route is ideal if you want lower monthly repayments than with an HP and like the idea of having a few different options at the end of the loan.
The third deal we’ve looked into is a Personal Contract Hire, PCH, which is also known as Personal Leasing. The name is fairly self-explanatory and describes renting a car for a set amount of time, typically a few years, with an agreed mileage limit. There won’t be an option to buy the car at the end of the contract as you have to give the car back; the money you’ve paid effectively covers the car’s depreciation value. With a low deposit and low fixed monthly payments, it’s not hard to see why this is one of the most popular deals. You can even purchase a maintenance agreement, so the cost of any repairs is covered. This option is great for cars that are known to hold their value well, as it is this difference between the new and 3-year-old values that determine the monthly cost. This option is ideal for anyone who wants to drive a much better car than they could ordinarily afford or if they don’t want to worry about their car’s value depreciates over time. This is also great if you tend to change your car every few years, as you’re not losing money in depreciation and if you’re someone that likes to look after their car.
Finally, the last deal we find worth discussing is Lease Purchase. It shares similarities with a PCP in that the residual value is left until the end of the agreement and this is based on the type of car and its mileage. This too means lower monthly payments and makes more luxury cars accessible to the general public. How a Lease Purchase differs from the PCP is that there is no guarantee at the end of the deal to be able to give the car back and you may have to pay the remaining value, either in cash or through further finance. This option is great for those looking for low monthly payments, want low-interest rates and do not want to commit to a fixed mileage amount.
The second step in the two-step process we mentioned is choosing who you’re going to buy your car on finance with. With Used vans Glasgow largest range of luxury cars, we think we’re the perfect place for you to find your next car and you could be driving away in your dream car sooner than you think. Check out our range of cars and finance deals online.
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