There are a number of financing options available to those looking to purchase a new car, with methods and sources available to suit a wide range of needs and circumstances. It is important that you look at the options that are open to you before you start looking for a car, as the methods for which you are eligible may determine where you have to get your car from and what sort of price range you should be looking at.
Some methods of finance are more expensive than others, and your credit rating and circumstances will determine which finance options are open to you. Below you will find five popular methods of financing the purchase of a car:
1. Bank loan: A number of banks offer specialist car loans to those with decent credit, and in some cases you can enjoy extra benefits with these loans, such as free HPI checks, discounts on insurance cover, and free or cheap breakdown cover. In most cases you will need to have good credit to get a bank loan for your car purchase. The amount that you will be able to borrow will depend on a number of factors, including your income, employment status, and credit rating.
2. Homeowner loan: If you are a homeowner, do not have a good enough credit rating for a bank loan, and do not want to look at options such as dealership finance or HP, you may want to consider a secured loan, which is a loan that is secured against your property. You can enjoy longer repayments periods with this sort of loan, and this means that you can reduce the monthly amount that you have to pay out on your loan.
3. PCP: Personal Contract Purchase, or PCP, is where you can make monthly repayment on your car, with a large chunk of the value deferred to the end of the loan in the form of a balloon payment. At the end of the term you can return the car and pay nothing else for it, pay the balloon payment and keep the car, or continue with the plan and switch to a newer vehicle.
4. HP: Hire purchase, or HP, is another common form of car financing, and this is where you make monthly payments on the car for a specified term. You continue to make the payments throughout the term, after which the car becomes yours.
5. Dealership finance: Many dealerships offer finance these days, but this form of financing can be expensive. There are a number of dealerships that offer their own finance to those with bad credit, and for those with no other options due to their credit rating this is often the only way to get a newer vehicle.
By: David Lynes
Posts Tagged ‘Personal Contract Purchase’
Top 5 Methods To Finance A Car Purchase
February 15th, 2010Posted in Articles
Tags: Balloon Payment Bank Loan Car Financing Car Loans Car Purchase Cheap Breakdown Cover Chunk Circumstances Credit Rating Employment Status Finance Options Financing Options Free Hpi Checks Income Employment New Car Pcp Periods Personal Contract Purchase Repayments Secured Loan
Car Finance Options Explained
December 3rd, 2009
When buying a new or used car there are so many options now available. From personal loans to more specialist finance such as Personal Contract Purchase it leaves a lot of options for which to choose from. So what are all the options and which one is right for you.
Personal Contract Purchase
PCP is fast becoming a very popular method of car finance. You pay a monthly amount towards the purchase of the car and at the end of a pre-defined purchase period you can then choose pay a lump sum to buy the car or just return the car with no obligation. This style of finance is great for those people who like to change their car on a regular basis but do not want to pay the full amount for a new car.
Hire Purchase
This is the more traditional way to buy a car. You enter into a contract to buy the car over a certain period of time during which pay the car off in monthly instalments. At the end of this period the car is paid for and legally becomes yours. As a Hire Purchase is effectively a secured loan if you miss any payments then the seller has a right to repossess the car.
Lease Purchase
Lease / Credit Purchase is similar to a Personal Contract Purchase (PCP) in that a lump sum amount is deferred to the end of the agreement. This lump sum reduces the regular monthly payments and allows you to purchase a more expensive care than you thought possible.
Unlike PCP a lease Purchase offers no option to return the vehicle to the finance company at the end of the agreed contract period. It is up to the customer to settle the final balloon payment through additional finance, cash or part-exchange with the finance company.
Contract Hire
This is an agreement where a rental is paid in return for the vehicle over a period of 1, 2, 3 or 4 years. It is ideal if your business prefers to reduce its financial risk by not owning the vehicle and having to deal with the administration with new cars and also worrying about the value of the car over time.
As a business you may also be able to apportion some of the rentals towards tax relief if you are VAT registered. Contract Hire is also deemed to be an operating and is regarded differently to purchase contracts. As a result your business may benefit from other tax advantages.
Contract Hire payments are specific to the car you buy and are also dependent on the amount of mileage the car will do each year. A deposit will have to be paid and this normally amounts to 3 months of the contract hire payment.
Conclusion
There are so many car finance options now available it would be hard to see why you cannot get your hands on whatever car you wanted, within reason. If you don’t fancy taking on car finance then you can also look at secured or personal loans if you think it would work out cheaper or easier to make your dream car purchase.
By: Paul Hockney
Posted in Articles
Tags: Balloon Payment Car Finance Car Lease Company Contract Contract Period Finance Cash Finance Company Finance Options Financial Risk Instalments Lease Purchase Lump Sum New Car New Cars Pcp Personal Contract Purchase Personal Loans Purchase Period Secured Loan Specialist Finance
