Collaborative Post¦So, you’re in the market for a new car and looking to finance it but how do you decide which car finance deal is right for you? If you’ve never taken out finance before or you have only ever used one type of traditional finance, then you may want to explore other avenues. It can also depend whether you are looking for a new car or used car too! Ideally, you should sort your finance first and get the best deal possible and then find the new or used car that’s right for you. But here’s a tip before you start looking at finance agreements: did you know that car prices are not absolute and that you can haggle down the price? Getting the best deal for the best price can take some negotiation, but you can use invoice pricing services to take the hassle out of buying a car.
Let’s take a look at the different types of car finance and the pros and cons of each!
Hire Purchase is a really straightforward type of car finance. You are essentially hiring the car from the lender until you have made the final payment. You can obtain a Hire purchase agreement at a dealership or an online car finance broker. Your payments are split into monthly payments with added interest and you usually have to put down a 10% deposit at the start of the hire purchase car finance agreement. The loan is secured against the car which means that if you fail to make your repayments then the lender has the right to take the car away from you. Once you have made all your payments at the end of your term then the car will legally become yours and the finance agreement will end.
Personal Contract Purchase or PCP is similar to a hire purchase agreement as you will put down a deposit and then make fixed monthly payments to an agreed term with added interest. You can obtain a PCP deal at a broker or at a dealership. You can also benefit from no deposit car finance offer with a PCP deal too. Unlike Hire Purchase though, you will have 3 options at the end of your car finance agreement. You can either hand the car back, pay the final ‘balloon payment’ and own the car or use the resale value of the car to get another car on a PCP deal.
A personal loan is different to both hire purchase and Personal Contract Purchase. You can usually obtain a personal loan from banks, building societies, credit unions and private lenders. It can be harder to obtain a personal loan if you have a low credit score. If you are applying for bad credit car finance then it may not be the best option for you. You get accepted for a certain amount which you will then pay back in monthly instalments plus interest. You can use a personal loan for pretty much anything so the money is deposited straight into your bank account and then you can get a car within your budget! You will also own the car from the start too, meaning that you can sell it at any point. However, you will still have to pay off the loan even if you sell the car before the end of the agreement.
Personal Contract Hire
Personal Contract Hire or PCH is a form of car finance leasing and can be obtained at a car dealership. You can pay an initial deposit followed by monthly payments to the dealer for the use of their car. At the end of the agreed term, you simply hand back the car and the finance has ended. The car was never yours to own as you only ever hire it from the dealer. You usually pay higher monthly payments, but you have more flexibility when you want to switch the car. However, overall, it could be more cost effective as payments include servicing and maintenance costs.
Disclosure: This is a collaborative post.
Welcome to my blog! I'm Laura, a mum of two. I live in Kent with my high school sweetheart husband Dave, our 5 year old daughter Autumn and 1 year old son Reuben.
I write about my experiences of parenting, as well as my plethora of interests including fashion, beauty, cars, weddings, mental health and the home.