Car Finance/Car Loans
Car Finance/Car Loans
Here is some information to help you to understand what type of car loan or used car finance may be best for you. Once you apply for car credit with Finance My Motor Car we can provide more information specific to your circumstances.
What is Car Finance?
Car finance includes various different types of contracts which allow you to make monthly payments for a car, used car, van, motorhome or caravan.
The loan or finance is generally secured on the vehicle you are purchasing, which means that the lender owns the vehicle and you make payments to the lender. You will not own the vehicle until all the payments due under the agreement have been paid in full.
It's usually as easy as 1 - 2 - 3
- 1. You successfully apply, then the lender pays the dealer for the car (or other vehicle)
- 2. You make monthly payments to the lender for an agreed amount and for an agreed amount of time
- 3. Once all payments are made, you own the used car (or vehicle)
Car finance works as a way of getting ownership when you don't have the ready cash to pay the full amount upfront. You can finance all or part of the overall cost of the vehicle, making it a convenient way to pay. Finance my Motor Car tailor make all finance plans to each individual, we take account of your budget and credit profile, so you can get monthly payments which are affordable.
Types of Car Finance
Hire Purchase (HP)
Hire Purchase is the most common type of finance, and you might have come across it before. It's really simple - you hire the vehicle and make monthly repayments until you've paid off the agreed finance. Once all the payments have been made the car becomes yours. You'll probably have to pay a small purchase fee or admin fee at the end or the beginning of the agreement.
- People who can't or don't want to pay cash for a vehicle
- People with all kinds of credit ratings
- People who've struggled to get other forms of credit such as personal loans
Personal Contract Purchase (PCP)
Personal Contract Purchase (PCP) is not as common as hire purchase but it's becoming more popular. It's really similar to hire purchase, but you have the option of whether you want to buy the car at the end of the loan or hand it back. If you want to buy it you pay a balloon payment. The value of the car is fixed (called the Guaranteed Future Value) at the start of the agreement, so you'll know what the balloon payment is from the start and can plan whether you want to pay it and buy the car.
- People who want a bit more cash in their pocket each month as the monthly payments tend to be lower
- People who like to change their car regularly
Conditional Sale is another variation, but with this type of car finance you don't have to pay a fee at the end, just the monthly instalments. Essentially, you pay for the vehicle in instalments. It belongs to the lender while you're making the repayments, even though you have possession of it. Once you've completed all the monthly payments you become owner of the vehicle.
- People of all credit profiles
- People who don't want to make a final large payment and spread the cost instead