Vehicle Financing Options
Corner Park Garages, Swansea and Cardiff
November 25, 2016 at 1:30 PM
Owning a car makes life more convenient whatever you're doing. However, sometimes getting the funds together to buy a car can prove to be a major challenge. If you have enough cash to buy a car, it's easy to get one; but what happens if you don't have enough and your credit score is not that good?
You don't need to give up; below are some financing options you can consider to help you buy a car.
Hire Purchase (HP)
If your credit score is not great, then the hire purchase could be the right way to go. This option doesn't always require you to have many assets or a good credit score as the loan is secured against the car.
The ownership of the car remains with the finance company until you make the final instalment. Although there will potentially be an additional cost for the hire purchase, it's worth it as you have between 12 and 60 months (depending on your circumstances and the age of the vehicle you choose) to pay for the vehicle.
Ensure that you are comfortable and able to meet the instalments because failure to pay as indicated might lead to the car being repossessed.
Personal Contract Purchase (PCP)
This financing method shares some similarities with hire purchase because it uses the same concept of paying a deposit and making monthly payments. The difference between PCP and HP is that when you make the final payment/instalment, you have the option of either returning the car to the dealer, keeping it or trading it for another. If you want to return the car, then the dealer will have to look at the mileage and condition of the car. If it's not in the right condition, then you will have to pay an extra amount.
The second option (keeping the car) requires you to pay a lump sum amount, also known as the balloon payment, according to the estimated value of the car. The final option enables you to sell the car privately to settle the debt. PCP is best suited for people who are looking for low monthly payments, those who like changing cars often, and people who are good at managing their mileage.
Personal Contract Hire (PCH)
PCH simply involves leasing a car for a period of two to three years without the option of buying it. This method involves some strict terms such as a specified mileage per year that you should adhere to. Once the agreed contract is over, you are required to return the car to the dealer. The deposit and monthly payments you make for the car are meant to cater for any depreciation. You are also responsible for other things such as repair and vehicle servicing. Ensure that the car you take for PCH has low depreciation because such vehicles require you to pay smaller instalments.
This option suits people who like changing cars, and those who have the desire to drive good cars but have no resources to own them. It's also a good option for those who have no interest in owning cars and people who enjoy looking after cars.