The most common forms of finance for a retail car purchaser are Hire Purchase (HP) and Personal Contract Purchase (PCP).

With Hire Purchase,  you can choose how much deposit you want to put down and you can repay the loan over one to five years at a fixed monthly repayment and interest rate. At the end of the agreement, title to the vehicle passes from the finance company and you become the owner of the vehicle.  You also can pay the loan off at any point during the agreement by asking the finance company for a settlement figure. HP agreements are great if you intend to keep your car for a while.  

With Personal Contract Purchase (PCP), you pay a deposit at the start of the agreement and then make repayments to cover roughly half of the balance plus all of the interest. The repayments are fixed and can usually be made over 2 or 3 years. The interest rate is also fixed. At the end of the agreement, you have three options: pay the balance and keep the car, hand the car back to the finance company and walk away or part-exchange your car for a new one.  PCP’s are great for people who like to change their cars regularly. They also offer protection against depreciation in that the finance company guarantees the value at the end of the agreement (provided that the car is in good condition and the mileage limit has not been exceeded). So if your car’s value is less than the amount owed at the end of the agreement, it’s the finance company’s problem.

Our experienced advisors at Better-Deal.co.uk can go through the different car financing options with you. Give us a call on 0845 129 0979 when you’re in the market for a new car.

One group of motorists, however, have nothing to fear.  People who bought a car using a personal contract plan (PCP) can hand it back to the finance company at the end of the agreement under the guaranteed future value clause and walk away. Thus, if the finance company has guaranteed the value at more than it is worth today, then it’s the finance company’s problem and not the car owner’s.

At www.Better-Deal.co.uk we offer a full range of PCP products. If you would like a PCP quote on a particular car, please give us a call on 0845 129 0979.