There are four main types of car finance, all of which have their own benefits and which you should seriously consider when you are about to purchase a car. They are PCP, PCH, HP and PL, and each of them are explained below.
Personal Contract Purchase (PCP)
PCP car finance stands for Personal Contract Purchase. It is a loan to be used for purchasing a car, but with you not having to pay off the car’s full value, and not claiming full ownership of the vehicle, until the end of the deal (you do have the option to bring this forward if you wish). There is a deposit of around 10% required, the amount of money you will need to borrow is based on the estimated drop in value of the car during the agreement, and there will be a balloon payment required if you wish to keep the car beyond the end of the agreement. Get more information when you visit the dealership or finance company.
Personal Contract Hire (PCH)
PCH car finance stands for Personal Contract Hire. In this case, it is a hire plan which can provide lower monthly payments, but once the agreement ends, you do not own the car, hence the word “hire”. That shouldn’t necessarily be considered a negative, though, as you will be able to drive a new car every couple of years under this car finance agreement. That you will be paying less on a monthly basis while being able to regularly update your vehicle, and without any concerns on the motor’s resale value, makes this an option worth considering.
Hire Purchase (HP)
HP car finance stands for Hire Purchase. This is a little different from Personal Contract Hire, in that it begins with a deposit, with terms then agreed for monthly payments lasting between 3-5 years, fixed by the interest rate set before the agreement begins. The deposit amount will impact the monthly payment amount, with the interest increasing as monthly payments are decreasing on longer contracts, and vice versa. You will completely own the car once the agreement has ended, and the fixed interest rate and monthly payments will ensure that you can make more effective financial plans for the coming years.
Personal Loan (PL)
Finally, PL car finance stands for Personal Loan. This option is arranged with your bank, building society or another finance company, and in this case, you will be able to borrow the amount that you deem appropriate to pay for a car. This means a lower deposit payment, it ensures that you maintain ownership of the vehicle from the start, and once the loan period ends, the car remains yours; you don’t have to give it back. Obviously, you need to ensure that you can afford the monthly payments that you agree to, and should the car incur any damage or is sold off during the loan period, you’ll have to repay the loan in full.
Only you will know which car finance option will be best for you based on your own family and financial circumstances, but these handy details should provide you with sufficient guidance to pick the most suitable option.
You can read more about car finance options by visiting www.checkcarfinance.co.uk.