Finance
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Hire Purchase (HP)
Overview
The most simple and straight-forward agreement is ‘hire purchase’ where after paying the initial deposit you make fixed monthly payments evenly spread throughout the agreed term to cover the full amount borrowed plus any interest and fees. Once all of the payments have been paid the car is yours.
Benefits
- More flexibility with deposits. Interest-only deals are sometimes available with large deposits
- You can choose the length of the agreement from a 1 year agreement up to a 5 year agreement
- No large balloon payment to pay off at the end of the agreement like there is with Lease Purchase and PCP
- Best option if you know you want to keep the car beyond the finance agreement as you will likely own the car quicker
- You can settle the agreement early by paying off the required amount
- There are no mileage restrictions
Lease Purchase (LP)
Overview
Lease purchase is our most popular type of finance agreement and is best suited to cars with higher values and for customers that like to change cars regularly. Similar to a hire purchase agreement with the main difference being a “balloon payment” is due at the end of the agreement as part of the value is deferred till the end in order to bring the monthly payments down. You can then choose whether to pay off the balloon, sell the car or you can always re-finance the car.
Benefits
- Lower monthly payments
- Finance companies often set higher residual values on used cars as they are not guaranteeing the value like they do with PCP thus making the monthly payments lower
- You can settle the agreement early by paying off the required amount
- Tends to suit customers who like to change cars more frequently
- There are no mileage restrictions
- There are no damage and excess wear fees like there is with PCP
Personal Contract Purchase (PCP)
Overview
PCP is similar to a lease purchase in that it defers part of the value till the end of the agreement giving you lower monthly payments during the agreed term but the key difference being that the lender sets a “Guaranteed Future Value” (GFV). This GFV gives you the added flexibility of returning the car at the end of the agreement with nothing to pay assuming you meet the condition and mileage terms set out in the agreement.
Benefits
- Lower monthly payments
- More flexibility with a variety of options at the end of the agreement
- Option to hand back the car at the end of the agreement
- You are effectively only paying for the depreciation of the car rather than the full cost of the car
- Best for people who are intending to keep the car for the full term of the agreement
- Tend to suit people buying brand new cars as higher GFVs are set in order to incentivise new car sales
Equity Release
Overview
You don’t have to be buying your next car in order to benefit from taking out a finance agreement. It is possible to take out a finance agreement on a car you already own in order to release some capital. This works well for our clients who might looking at a property purchase or an investment opportunity and initially paid cash for their car. The equity release process means we buy your car from you and sell it back to you on a funding facility that meets your needs.
Benefits
- Raise cash quickly for additional property purchase or investment opportunity
- No intermediary dealer making it very straightforward
- Easier to get acceptance than a personal loan and often lower rates too
