Lets Compare the different car finance options, mainly the different options that are used can be split into two brackets.
The first of which is called a PCP this stands for personal contract purchase. I summary PCP’s have what is called a balloon sum at the end of the term which you can either pay off in full, re-finance or swap cars and carry on the re-payments.
Using this method of finance has its benefits, mainly in the fact that the monthly costs are a lot lower compared to the other option. The only downsides regarding the PCP plan is the balloon payment which can be tricky to negotiate mainly because some people cant fork out possibly a grand on demand, and the fact that cars on PCP plans cannot be over 4 years old. The way around the balloon payment is to possibly re-finance the balloon or swap to a different car. In regards to the 4 year old situation there is nothing that can be done apart from switching to a hire purchase agreement.
Apart from the PCP plan the other option is a hire purchase agreement (also known as straight finance) where there is no balloon. This means that the monthly costs on the car will be slightly higher but in return there is no lump sum to be paid at the end of the term, meaning you keep the car no matter what (as long as you keep up with the re-payments). Another bonus compared to the PCP plan is the fact that you can have a car up to 10 years old as long as it doesn’t have more than 100,000 miles on the clock.
To summarise, PCP is good for low monthly payments as long as you have some spare cash sat in your bank, and hire purchase is good if you want possibly an older car or dont want to muck about with the lump sum at the end.
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