Getting the car of your dreams might not be so out of reach anymore thanks to the many car finance options out there nowadays. You no longer need to save up all your pennies for years in order to be able to afford your perfect motor. In fact, there are even options of car finance for bad credit as well, ensuring that everyone has the opportunity to access a car. Car finance does come in different options though, so it’s important that you know the difference between them all. So, keep reading and discover the top 3 car finance options!
- Hire Purchase
Hire purchase is one of the most common car finance options, and it means that you essentially hire the car from the lender until you pay it all off at the end of your term. The loan is secured against the car, so it won’t be yours until it’s all paid off. This means that if you aren’t able to make your repayment, the car can be taken back. Typically, if you opt for a hire purchase, you’ll need to pay a deposit upfront and then make your monthly repayments for an agreed term. The size of your deposit impacts how much you repay each month as well. The bigger the deposit you put down, the less you’ll pay back each month. After you’ve made all your agreed repayments, the car then legally belongs to you. You can also pay it off sooner than your agreed term as well. All you need to do is contact the lender and ask for a settlement figure. One of the benefits of hire purchase is that your repayments are fixed, allowing you to easily fit them into your budget for the foreseeable future. Another great factor is that if you decide at the end of your term that you don’t want to keep the car, you can hand it back to the lender. With all of this in mind, it’s easy to see why hire purchase is the most common form of car finance.
- Personal Contract Purchase (PCP)
A PCP is slightly different to a hire purchase, as you’ll be able to pay a deposit over a fixed amount of time. But at the end of the term, you have to either hand the car back or use the equity as a deposit for a new car from the same lender. You can also become the owner of the car at the end of the term, but you’ll need to pay the Guaranteed Minimum Future Value. Most PCP will also have a strict mileage number that your car can display each year too. If you exceed the agreed mileage, then you could be liable to pay extra fees to the lender. A lot of people like a PCP as it gives them the option of keeping the vehicle or giving it back, something which not all hire purchases do. It’s also great that you can essentially upgrade at the end of your term like you would with your smartphone contracts. This means you could have a new car every few years with ease. However, it’s important to note that if you return the car back in a condition that is considered worse than general wear and tear, you could be liable to pay for the repairs. So, if you’re wanting to upgrade your car on a regular basis, then a PCP might be for you. However, if you’re wanting to use finance to own the car at the end, then you might want to consider a different option.
- Personal Loans
Personal loans aren’t specific to car finance, but they are used very often to purchase a new car. A personal loan is where you borrow an agreed amount of money over a set period of time. Youwill then make monthly repayments until it’s all paid off. These repayments are also subject to interest, so you’ll end up paying back a little more than you originally borrowed. Lots of people like to use a personal loan to buy a car as it’s not secured against the car, meaning that if they can’t make their loan repayments, they won’t lose the car. It also means that you can sell the car whenever you want as it already belongs to you. One of the downsides is that you might not be able to get a loan for the full amount of the car if it’s quite expensive. Typically, personal loans don’t exceed £25,000, so if you’re looking at a car worth more than that, it might not be the best option for you. A benefit of using a personal loan is that you can buy your car from whoever you want. This means you might be able to find a better deal from a private seller than you would at a dealership, but this does come with it’s own set of risks. It’s worth noting too that a bad credit history can make it hard for you to obtain a personal loan. This is why there are car finance options like hire purchase that cater to those with bad credit scores. Your payments with a personal loan are mostly fixed as well, so you should find it easier to calculate them into your monthly budget. So, while a personal loan isn’t always a guarantee, they are super useful and can be a great way to access your ideal car.
Buying a car can be a dream that’s hard to reach for some people. But with the help of car finance, it can soon become a reality. From hire purchase to a personal contract purchase, there are options in place that are designed to help you access whatever car your heart desires. So, instead of trying to save up for years and years to afford one car, why not go with a car finance option and you’ll be able to get the vehicle you want the most instantly.
