Driving around on the UK’s roads you may have noticed the up to date models sporting reg plates from the last five years to now cruising past you. Have you ever thought about why there are so many?
Three words: vehicle finance deal.
You see it everywhere – splashed across billboards when you sit in front of the TV and outside the dealership. Getting hold of a decent finance package has never been so easy.
Feeling overwhelmed? Here’s what you need to know about car finance:
Types of car finance
Stepping into a dealership is exciting and at the same time, mind-boggling. Knowing ahead of the game what your finance options are will help you keep your cool and get you the optimal deal that suits you.
The three main finance deals on the table are:
Personal Contract Purchase (PCP)
Perhaps the most popular type of car finance, PCP allows you to pay a lump deposit followed by fixed monthly instalments. If you want to own the car outright, sell it privately or return the vehicle, you can pay a lump sum towards the end of your agreement.
People who like to upgrade their vehicle regularly without the hassle tend to go for this option.
Never forget that getting a car though PCP is virtually the same as hiring a vehicle. Stick to your agreed terms, mileage and keep your car in good condition. Only when you pay the final lump sum, the car will be entirely yours.
Hire Purchase (HP)
Owning a vehicle has been made simple with the HP finance package. The loan is secured against the car itself, which is yours as soon as you have made the final payment. Selling the car on isn’t possible without the lender’s permission, but you can return it back to the dealership.
Like most other finance deals, you place down a deposit, the loan period is set, and then you make your repayments plus interest. Once completed, the vehicle is yours outright.
With features like servicing often included, it’s worth considering a HP loan.
Perfect for those who don’t want to own a vehicle, getting a car as a contract hire or personal lease is a good way of switching up your motor. Your monthly payments take into consideration the make and model, length of contract and agreed mileage limits.
Contract hire does have its drawbacks. Typically you are expected to pay at least three months rental upfront, which can take its toll on your bank balance. However, servicing is often included and will save you money in the long run.
When considering any finance deal, take a look at the APR attached, as wll as any extra administration and fees. Terms and conditions are there to be read – so take note of the finer points of your arrangement before agreeing.
Take a look at the car finance options we offer from our reputable range of lenders.
Am I locked into finance with a dealership?
Although innovative, marketing and salesmanship can confuse the consumer. Getting a finance deal that is offered by the dealership may look attractive and straightforward; however, it may cost you more in the long run.
You as the customer are free to shop around. Before you even set foot in a dealership it is worth researching what quotes are available to you.
Will shopping around damage my credit score?
Taking care online while shopping around is recommended. Filling out unnecessary applications for multiple lenders is likely to set alarm bells ringing with providers.
Using reputable companies that offer “soft credit searches” will leave no record on your credit history. They are simply matching your record with your details to make sure it’s you.
As soon as you commit to a quote, and you are absolutely happy with what’s on offer, fill out the application form. This will incur a hard credit check which will be seen on your history.
Making your repayments on time is healthy for your credit rating
A common misconception is that having any type of finance can give you a bad credit rating. It’s simply not true. Making your repayments on time shows other lenders that you are potentially a low risk compared to others with no credit history.
Missing or making late repayments could be detrimental to your rating as it makes you a higher risk for other lenders to invest in. Choosing an affordable deal that you feel confident in repaying is the best choice.
Feel like you want to pay off the final balance on your loan early? No lender can refuse you paying the outstanding bill in full at any time during your agreement.
Check out your terms and conditions for any hidden penalties and charges that may occur.
Ready to take your new wheels for a spin? Get your finance quotes ahead of the dealership to get the most out of your money.