Car Finance Options
Buying a car on finance is the solution sought out by those looking to spread out the cost of a vehicle in instalments that can be paid on a monthly basis. There are several types of finance solutions available on the market, and each offer specific terms that must be met.
This article will explore each finance agreement available, as well as some technical jargon you might come across when reading through the contracts.
Content
- How does car finance work?
- How to get a car on finance?
- PCP: Personal Contract Purchase
- HP: Hire Purchase
- What Is PCH?
- What happens at the end of finance term?
- How to sell a car on finance?
- Frequently asked questions
How does car finance work?
A car finance agreement is signed by the buyer and the lender, and allows the customer to pay for the vehicle with monthly payments over a period of time with interests included in the contract.
It’s common practice for companies to run a credit check before granting you the car finance to make sure you don’t have bad credit. If you’ve been refused a car finance before, make sure to raise your credit score before the lender or the dealership perform a hard search. Having too many hard searches in your credit history in a short amount of time could affect your credit score negatively.
Most finance schemes require a down payment, and the remaining balance is charged in monthly instalments of a pre-established sum.
The terms of the finance agreement vary according to the scheme, as well as the rules to full ownership of the vehicle and its devaluation.
Finance agreements aren't exclusive to purchasing brand-new vehicles. There are several options available for used cars and commercial vehicles.
How to get a car on finance?
There are several types of finance agreements you can choose from. Personal Contract Purchase (PCP), Hire Purchase (HP) and Personal Contract Hire (PCH) are amongst the most popular finance schemes available on the market. Get in touch with your local Evans Halshaw retailer and book a visit to explore the range of vehicles available on finance.
PCP: Personal Contract Purchase
Personal Contract Purchase (also known as PCP) is one of the most popular finance schemes available. This type of solution is ideal for people who are looking for flexibility at the end of the contract.
The deposit required for a PCP agreement is, on average, 10 percent and the rest of value is loaned to cover the GMFV (Guaranteed Minimum Future Value), which is an estimate of how much the vehicle will have depreciated by the end of the contract.
At the end, you'll have to decide if you're going to return the vehicle to the dealership and walk away, if you'd like to take on another PCP contract for a new car or if you're going to make a final payment (called balloon payment) and take full ownership of the vehicle.
Learn More About PCP FinanceHP: Hire Purchase
Hire Purchase, also known as HP, is the simplest finance agreement to understand, and the payment method is straightforward. Unlike PCP, this finance scheme only allows one outcome at the end of the contract: full ownership of the vehicle.
Highly recommended to those who have their heart set on the car they’re purchasing and intend to own it for a long period of time, the term of an HP agreement is, on average, three years. It requires a down payment, commonly set at 10 percent of the total value of the vehicle, and based on this deposit, the monthly instalments will be calculated.
What Is PCH?
Personal Contract Hire, also known as PCH, is a form of leasing (or renting) a new car of your choosing. This type of contract is ideal for those who don’t have the desire to own the vehicle at the end of the agreement, and prefer to renew the contract if and when needed it.
A rental deposit will be required upon signage of the papers, and the value of the monthly rental fee will be calculated based on the deposit. The more you put down, the less you have to pay every month. The usual agreement length for PCH is two to three years.
At the end of the term you can simply hand the vehicle back to the dealership.
What happens at the end of finance term?
What happens at the end of your finance term will depend on the type of contract you have.
- PCP: You'll have three options. Return the vehicle to the dealership and settle the contract, make a final payment (called balloon payment) and take full ownership of this vehicle or get another PCP contract for a new car.
- HP: After you've made the payment for the last instalment, the vehicle will belong to you.
- PCH: You'll return the vehicle to the dealership. You'll be able to take another lease.
How to sell a car on finance?
The finance provider owns the vehicle until the completion of the payments. Until then, you’ll need their permission to sell your car. If you’ve paid more than 50 percent of your loan, you can hand the car back and request a voluntary termination of contract.
If you haven’t paid 50 percent or more, you can get an agreement with the retailer and get them to take the vehicle back and put it for sale. You’ll be responsible to keep paying the monthly instalments until the car is sold.
Get your car with Evans Halshaw
When it comes to car finance, there are a many agreements to choose from. Each agreement comes with their own advantages and disadvantages, so it's important to consider your options in depth. Finance can also be had on used cars and vans.
Evans Halshaw has a wide range of deals and offers on PCP, HP and PCH, for best-selling brands. For more information and advice about finance agreements, contact your nearest Evans Halshaw retailer, where our knowlegeable associates can help you find a suitable option.
Frequently Asked Questions
Most finance agreements accept part exchange as part of the down payment of the new vehicle. The remaining value can be paid with cash.
Most car finance available on the market work like a loan where you'd be paying a monthly fee with interest until the end of term. The 0 percent finance work in a similar way, where you'll be able to pay for the vehicle in monthly instalments, but no interest is charged. Think of it this way, 0 percent car finance is like borrowing money for free, meaning, without having to pay interest on it.
Finance agreements range, between three and five years, on average.
Even though it can be less cost-effective, it is possible to get car finance with a low credit score. Working on improving your credit score is the best option, however, putting down a larger deposit and having a guarantor to cosign the loan with you, are ways to improve your chances of having your finance request approved.
Yes, you can end a car finance agreement early. Most types of finance contracts require you to have paid at least 50 percent of the car before you can terminate the contract and return the vehicle. In some cases, extra fees and depreciation equity will be charged as well.
