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Car Finance

  • Leases, Contract Hire, PCP & HP
  • 80 plans / 18 lenders
  • All credit ratings
  • Flexible purchase options
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Compare Car Finance

Other than a property, your car is one of the largest expenses you might ever have. Often an outright purchase simply isn’t affordable. So with a car a basic necessity for most people how can you fund it?

Fortunately many people simply don't feel they need to own the car they drive. And because of this modern car finance arrangements can solve the affordable new car conundrum. There are now a variety of purchase plans that break down the cost into smaller monthly payments.

Why are 90% of cars paid for using finance?

In the UK nine out of ten of us now pay for our car using one of these car finance solutions. The reasons for using it are obvious:

  • You spread the cost over the time you use the car
  • With leasing (PCH & PCP) you're only paying for use not the final purchase, which means monthly costs tend to be lower / more affordable
  • Payments often include servicing
  • You can afford a new/newer car than otherwise
  • You can afford a better brand than otherwise
  • You don't need a perfect credit history

Which Type of Car Finance would suit you?

  PCH PCP HP Car Loan
Basic Principle
Long term car rental
Long term car rental with option to own at end by making a final payment
Plan is designed to achieve car ownership at end
Obtain loan & buy car separately
Car & Finance linked?
yes
yes
yes
no

Pay Deposit?

yes
yes
yes
whole sum
Monthly Payment?
yes
yes
yes
yes
Payments cover?
Depreciation & Interest
Depreciation & Interest
Car Price & interest
Car Price & interest
Own car during contract?
no
no
no
yes
Own car at end?
no
If you pay final "balloon" payment
yes
yes
Restrictions?
Mileage/Damage/No Mods/Can't sell
Mileage/Damage/No Mods/Can't sell
Can't sell car during contract
no
  more info more info more info more info

Compare Monthly and Total Payments

It's useful to compare the monthly repayment and the total amount you would pay over the life of alternative types of car finance contract. It's possible to draw some general conclusions, although you should always get quotations.

Example: BMW 316 SE 4door - 10,000 miles p.a.; £3000 deposit; 36 month contract

PCH PCP HP
£464/month £505/month £729/month
3+35 rental profile

OTR Price £26860

Borrow £23860

Cost of Credit £3196

APR 5.7%*

Total Repaid £27056

GFV (final payment) £8869

OTR Price £26860

Borrow £23860

Cost of Credit £2394

APR 6.5%*

Total Repaid £26455

  Total Paid for final ownership £30049 Total Paid for ownership £29244
Total Paid £17634 Total Paid over 36 months £21180 Total Paid less mkt value £20375
*based on excellent credit rating. Source: Carzu.com website, June 2017

This example demonstrates:

1. If you definitely don't ever want to own the car then contract hire (PCH) may be preferable to PCP.

2. If you definitely want to own the car then HP could be cheaper than PCP

3. If you want to keep your ownership options open then PCP may be the best bet

But you should always get proper quotes for the options that may be of interest to you - how your credit rating is assessed could be different depending on the provider, and this will influence the best route. We have seen examples where contract hire is the most expensive of the 3 options. So it pays to shop around.

Video: PCP vs. HP

 

Representative Example

Loan Amount

£7500

Monthly Repayment

£222

Loan Term

48 mnths

Total Repayment

£10,661

Rate of Interest p.a.

18.5%

Representative APR

20.1%

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