Looking to finance a car? These are your key options

Finance is one of the most popular ways to get behind the wheel of a new or used car. Whether it’s the ability to split payments into more manageable chunks or being free to use larger sums of money elsewhere instead of having them tied up in one car, finance is something that a lot of people consider when getting a new car.

There are, however, different types of car finance available with each bringing positives and negatives. Here, we’re going to take a look at the most popular forms of finance and what each one offers.

Personal Contract Purchase (PCP)

At the end of the agreement, you can pay a final ‘balloon’ payment and own the car outright or exchange the vehicle and start a new finance plan. You’ve also got the option to return the car to the supplier or dealer and walk away from finance altogether. PCP is a good option for drivers who like to swap into a new car on a relatively regular basis, though there is always the possibility of buying the vehicle outright should you want.

Hire Purchase (HP)

Hire Purchase – or HP – is similar to PCP in many key areas. You’ll pay an initial deposit and make fixed monthly payments. However, those monthly payments are going towards the overall cost of the car, and at the end of the agreement, you’ll own the vehicle outright. From that point, you’ll be able to drive the car payment-free, or even sell it.

HP agreements are usually accompanied by higher monthly payments as you’re paying off the total cost of the vehicle. However, this could be a good option for drivers looking to own their cars outright.

Personal Loan

A Personal Loan can be a simple and easy way to finance a new car. Essentially, you’ll get a loan from a bank or lender and use this to purchase the vehicle. It’ll mean that you own the vehicle instantly, so you won’t be making any payments to a specific financing company. However, you’ll need to pay off the loan in regular instalments or risk bad credit and repossession of assets.

The amount you’ll be able to borrow will depend on your circumstances and credit score, so you may not be able to get the same type of vehicle that you would with other forms of finance. You’ll also pay interest on the money borrowed and this amount will depend on the duration of the loan period, as well as your credit score. However, getting a Personal Loan is ideal for those who are looking to own their cars outright and don’t want to have to return them at the end of an agreement.

Leasing

It’s best to think of leasing a little more like renting. You’ll never own the car outright and unlike other forms of finance, there’s no option to purchase the car at the end of the agreement period.

However, leasing is ideal for those who like to change their cars frequently – agreements are usually two or three-year periods – and ensure that you’re behind the wheel of something new.