Compare Car Finance
- PCP & Contract Hire
- HP & Car Loans
- Compare differences
- Understand terms
- Choose what best suits you
- Flexible purchase options
Which Car Finance Suits You?
Other than property, your car is likely to be the largest expense you ever have. Given that outright purchase simply isn’t affordable how can you fund it?
Many people don’t feel they need to own the car they drive. Because of this car finance can make a new or better car truly affordable.
There is now a variety of purchase plans that break down the cost into smaller monthly payments.
Detailed Information:
90% of People Buy a Car on Finance
In the UK nine out of ten of us now pay for our car using some form of car finance. The reasons for using it are obvious:
- You are spreading the cost over the time you use the car rather than paying it upfront
- Leasing options (PCP & PCH) offer even lower repayments because you aren’t paying to buy the car outright.
- You can probably afford a new or newer car would otherwise be possible
- You can opt for a better brand than you otherwise could
- Monthly payments often include servicing
- You don’t need a perfect credit history
Key Differences Between Car Finance Types
| 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? |  | | |  |
| Pay Deposit? | | | | whole sum |
| Monthly Payment? | | | | |
| Payments cover? | Depreciation & Interest | Depreciation & Interest | Car Price & interest | Car Price & interest |
| Own car during contract? | | | | |
| Own car at end? | | If you pay final “balloon” payment | | |
| Restrictions? | Mileage/Damage/ No Mods/Can’t sell | Mileage/Damage/ No Mods/Can’t sell | Can’t sell car during contract | |
| more info | more info | more info | more info |
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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.; £3,000 deposit; 36 month contract
| PCH | PCP | HP |
|---|---|---|
| £464/month | £505/month | £729/month |
| 3+35 rental profile | OTR Price £26,860 Borrow £23,860 Cost of Credit £3,196 APR 5.7%* Total Repaid £27,056 GFV (final payment) £8,869 | OTR Price £26,860 Borrow £23,860 Cost of Credit £2,394 APR 6.5%* Total Repaid £26,455 |
| n/a | Total Paid for final ownership £30,049 | Total Paid for ownership £29,244 |
| Total Paid £17,634 | Total Paid over 36 months £21,180 | Total Paid less mkt value £20,375 |
*based on excellent credit rating. Source: Carzu.com website, June 2017
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What this comparison tells us:
1. Want to own the car? Then HP could be cheaper than PCP.
2. Don’t want to own the car? Then contract hire (PCH) may be preferable to PCP.
3. Unsure about ownership? Then PCP may be the best bet as it keeps your options open.
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.
Car Finance Loans Guide
If you’re uncertain which type of credit might suit you or you have a money problem then one of guides may help you. We summarise each type of loan and their pros and cons, and address issues regarding debt and credit ratings.
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