Because we’re a lender and a broker we can provide a wide range of products to suit your needs. We enhance and accelerate the finance options at your disposal through cutting edge technology and, most importantly, our people.
What is Hire Purchase?
Hire Purchase is possibly one of the easiest finance options to understand. You effectively hire a vehicle from a finance company for an agreed period of time.
As such a Hire Purchase agreement is one of the most common methods of paying for your new vehicle, typically lasting 2-3 years but it can stretch to 5 years to meet your needs.
You come to an agreement with the finance company about your initial payment (unless predefined by the finance company), your monthly payments and the term of the policy. At the end of the agreement (assuming everything has been paid under the agreement) then the title to the vehicle is transferred over to and you become the legal owner.
As the lender is keeping the ownership of the vehicle until the end of the agreement this gives them more security in the event of payment problems. The lender can also offer you more attractive terms and conditions because they keep ownership of the vehicle until you make your final payment.
Benefits
Once you make your final payment you own the vehicle
Convenient straightforward application process
Fixed repayments and interest rates
Additional protection over a personal loan
Payments and term to meet your budget
Keeps existing credit lines free
There is no need to estimate the mileage at the outset
Rebate of future interest if you settle your agreement early
Additional customer protection with regards to the satisfactory quality of your vehicle
Risk
The loan is secured against the vehicle, therefore if you miss payments on the loan the vehicle may be repossessed
Benefits
Low initial deposit
Low monthly payments
Flexible options at the end of the agreement
A specified Guaranteed Minimum Future Value (GMFV), therefore protecting you from market fluctuations
Ability to change car more regularly – every 2 years
Risk
If you exceed the anticipated annual mileage there may be an excess mileage charge at the end of the contract
The load is secured against the vehicle as such if you miss payments then the vehicle may be repossesse
What is Personal Contract Purchase
A Personal Contract Purchase, or PCP, is a form of a Hire Purchase agreement. However, your regular monthly payments are calculated by off-setting a guaranteed future value for the vehicle after a pre agreed time and agreed annual mileage, this value is referred to as the Guaranteed Minimum Future Value (GMFV).
Your regular payments are calculated by taking the difference between the loan amount and the agreed future value (GMFV), plus any lender interest and fees.
By deferring the GMFV to the end of the agreement, your regular monthly payments could be lower than those on a HP agreement.
A PCP agreement also gives you the flexibility to decide whether you would like to own the car outright at the end of the agreement by paying the deferred value (GMFV), or returning the car to the lender and entering into a new car finance agreement.
How Does PCP Work?
- Deposit & Payment
- Tailored to individual requirements
- Annual Mileage
- Tailored to individual requirements
- Guaranteed Minimum Future Value (GMFV)
- Also known as the balloon payment, this is the expected value of the car at the end of the agreement
Options at the End of the Agreement
- Own the car outright – by paying the balloon payment
- End the agreement – by handing the car back to the finance company
- Part Exchange the vehicle for another car
What are Personal Loans?
One option could be to take out an unsecured personal loan, borrowing a certain amount of money over a set period and making monthly repayments. This means you would own the vehicle as soon as the car dealership gets the money – so you’ll be able to sell the car on if you wanted to
Benefits
You Don’t Need Great Credit
You Have Plenty of Time to Pay
Rates Are Reasonable
You Can Borrow Any Amount
Risk
Fixed Payments
Prepayment Penalties
Higher Rates Than Some Loans