If you need to replace your car or other vehicle then two popular forms of finance are hire purchase (“HP”), and personal contract purchase (“PCP”). Under both these options the finance company owns the car while you make the regular payments. So, what’s the difference between the two?
With HP you are working to towards final ownership of the car. With PCP you can delay the decision to own the car until the very end. In fact with PCP there are 3 final outcomes to choose from:
- Hand the car back with no further costs
- Part exchange the car as part of a new PCP deal
- Purchase the car outright with a final “balloon payment”
If you have no desire to ever own the car then a PCP arrangement could be the most cost effective way of getting a new car. Also keep in mind that choosing a car brand that depreciates more slowly could also help to keep your monthly costs down – after all what you’re really paying for is the depreciation of the car plus some interest. There’s plenty more information about car finance at Solution Loans.
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