Buying a new car can be a confusing and time-consuming process, specifically if you are new to a number of the finance options available to you. However, it doesn’t have to be a difficult process at all. By understanding the quick car finance options that are available to you, you can pick one that will provide you with the best possible deal for your circumstances. To aid you in reaching this goal, we have compiled a list of some of the car finance types that you need to be aware of.
Different Finance Types
When looking to purchase a car, there are several finance options that you can consider. Each of which can benefit you in the long term. But before applying for finance of any kind, it is important to be aware of these differences. To help you fully understand each of these finance options, we have outlined some of the key differences below.
Hire Purchase – This is a finance type that in most instances requires you to pay an upfront deposit 10% of the value of the car and then make six monthly repayments of a fixed amount over a predefined term. However, it is important to note that the car is not yours until after the final repayment. This means that the loan is put against the car. This, therefore, means that any repayments that have been missed could lead to the car being taken away. This is by far the most popular way to finance a new car.
Personal Contract Purchase – This is similar to hire purchase in terms of the deposit amount and the fixed monthly repayments, however at the end of the contract, there are multiple options to choose from. You can either return the car, keep it but pay the resale value of it in one lump sum payment or put the resale value of the current car towards buying another and continue the process again. This is one of the more complicated finance options but can be helpful in the long term.
Personal Contract Hire – This is the third most popular way of financing a car and is one of the more complicated options. To undergo a PCH, you will need to pass an initial credit check. At the same time, a month or so of lease payments will need to be placed as a deposit for the car. You are then advised to follow mileage restrictions and other rules and regulations within the contract whilst meeting the monthly repayments, that are organised with your lender. The car is then returned at the end of the agreement. You then have the option to begin again with another car or go elsewhere. This style of contact does not provide you with the ability to buy at the end of the term.
Understanding Repayment Methods
In addition to understanding these different finance types, it is crucial that you fully understand the different repayment methods. These will determine how much you are paying per month based on the interest rate and the amount taken to provide you with a monthly sum. This should be calculated before signing to ensure that you can meet the repayments on time and in full.
With this in mind, there are numerous ways that you can gain access to financial help when purchasing a car, allowing you to enjoy all the fun of a brand-new car with an affordable monthly repayment.