Types of Car Finance

There are various ways to finance your next vehicle purchase. Below we cover the three most popular methods in the current market. GoFinance.co.uk will discuss your options and advise which product would be most suited to your circumstances and needs.

Hire Purchase (HP)

Hire purchase (also known to us in the trade as ‘HP’) is the most commonly known way to finance your next vehicle. It is straightforward in how it works – You choose the vehicle; the finance company will pay the selling dealership. You are then essentially hiring the vehicle throughout the term of the agreement from the finance company. Once you have made all of your monthly repayments you are given the option to take ownership of the vehicle which will switch the title into your name.

ADVANTAGES…

  • Regular payments and loan term set out at start of the agreement which will allow budgeting easier.
  • A deposit is not always required.
  • Once you had made all the contracted monthly repayments you will own the car outright.
  • Most popular way of financing a vehicle and offered by majority of finance lenders.

Personal Contract Purchase (PCP)

Personal Contract Purchase (or PCP to us in the industry) is similar and also different to hire purchase – let us explain.  As with HP you will choose the vehicle and the finance company will pay the selling dealership.  As with HP you will still make monthly repayments to the finance company, but you are only paying a portion of the total amount due (With PCP your monthly payments will be lower than HP)  You will then have a lump sum (Also known as a balloon payment) to pay at the end of the agreement.  At the end of the agreement you can do one of three things; You can simply give the vehicle back; You can part exchange the vehicle and take out a new PCP deal on a new vehicle or you can buy the vehicle by paying the pre-agreed balloon payment.

ADVANTAGES…

  • Monthly repayments may be cheaper than other finance products as the largest part to pay will not be due until the end of the agreement. (If you choose to pay this to own the vehicle).
  • The choice is yours at the end of the agreement to decide whether you keep the vehicle or not. This would suit an individual who wants to regularly change their vehicle every few years.

Personal Loans (Car Loans)

A Personal loan (also referred to as a Car Loan) is different to Hire Purchase and Personal Contract Purchase in respect of the loan not being secured on the vehicle you buy. Usually Personal Loan providers can offer better rates of interest than HP / PCP providers – however, usually you need to have a good credit rating to be eligible for this product. Another difference with a Personal Loan is the way the loan funds are paid – unlike HP/PCP the money is transferred to you so you can purchase the car whereas with the other two products the funds are sent direct to the selling dealership.

ADVANTAGES…

  • You will not be required to place a deposit as you can borrow the full amount through a personal loan.
  • The loan funds are paid directly to you so it leaves you in a good position to negotiate on price with the selling dealer as you become a cash customer to them.

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Questions?

  • How quickly can the finance be completed?
    We will endeavour to come back to you within 1 hour with a decision from the point you make your online application. Once you are approved, we will ask you to locate the vehicle you are wishing to purchase. Once the vehicle is approved by the lender the quicker you return your documentation the quicker we can get you on the road!
  • Do you finance any vehicle?
    GoFinance.co.uk regularly help finance Cars, Vans, Caravans and Motorbikes. So we would like to think we cover a broad spectrum of vehicles.
  • Do you accept bad credit?
    Yes we do. A high portion of customers we speak to on a daily basis have experienced some sort of credit problems in the past. We have a large panel of lenders that help such customers so please get in touch and we will try our best to match you up to a finance lender.
  • Can I apply Online?
    Yes. You can either complete our short online application form or pick up the phone and we can complete the application online. We do like to speak to all of our customers, so once you have made your online application one of our experienced sales advisors will be in contact to talk you through the next steps.
  • What sort of deposit do I need?
    The deposit required can sometimes depend on the lender you have been accepted by. Not all lenders require a deposit, so you can finance the full amount, although some dealerships may ask you to put a small amount down to secure the vehicle before your finance is paid out. Remember, if you do not have a deposit, you will be borrowing a higher amount so will pay back more in interest.
  • What is the interest rate?
    The interest rate depends entirely on which lender you are accepted with and your credit history. To give you an idea, please refer to our finance calculator. A GoFinance.co.uk personal advisor will be able to discuss the rates available to you once we have had sight of your application.

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