Finance Explained

The pros and cons to all available finance products

HIRE PURCHASE

Hire Purchase (HP) is a secured loan finance agreement against your vehicle.
Spread the cost of the vehicle in a series of monthly payments.
Once you have made your final payment, you will own the vehicle outright.
Your monthly payments will include the cost of the vehicle plus the interest.
Some lenders may charge an administration or documentation fee.
The loan is secured against the vehicle.
The vehicle can be repossessed if payments are not kept up.
The finance company is the legal owner until the agreement is paid in full.
Non-payment can negatively affect your credit rating.
To lower the monthly payments, you might have the option to add a balloon payment at the end of the agreement. This is often referred to as a lease purchase or hire purchase with balloon.

PERSONAL CONTRACT PURCHASE

PCP (Personal Contract Purchase) is a secured loan agreement against your vehicle.
The difference between HP and PCP is that the value of the vehicle at the end of the finance agreement is calculated at the start and deducted from your monthly repayments.
Generally, PCP monthly repayments are lower than Hire Purchase.
PCP finance agreements gives you the flexibility to decide whether you want to own the car outright at the end of your agreement.
You can either pay the future value payment (sometimes referred to as the ‘balloon payment’) or return the vehicle to the lender.
Charges, mileage and other terms and conditions may apply.
Any fees on the agreement are charged by the lender.
As a broker, we do not charge any fees to you for our service.
Non-payment can negatively affect your credit rating.
The vehicle is not legally yours.
If you cancel your contract early, it could be expensive.
The vehicle can be repossessed if payments are not kept up.

FINANCE LEASE

Finance Lease gives business customers use of an asset of newer, higher specification than the could otherwise buy outright
The cost of the asset is paid by monthly instalments rather than a large upfront investment
The cost is spread over a period of time and paid by fixed monthly instalments that will not increase – even if bank interest rates rise
Tax advantages – VAT is payable on the rentals, not the purchase price, while rentals may be offset against taxable profit (special rules apply to cars)
Claim up to 100% of the VAT on commercial vehicles, and 50% on cars (subject to being VAT registered)
Flexible repayment structures are available, tailored to match your company’s cash flow
The agreement is secured against the asset: therefore if you don’t pay, the asset may be repossessed
Non-payment can negatively affect the credit rating of both the business and the guarantor
The finance company are the legal owners of the asset, and you will not own it
The asset is not protected if you or your company are made bankrupt

CONTRACT HIRE

Often the cheapest way to access the newest, safest cars or vans
Delivery, breakdown, warranty, and road tax are all included in the price
Payment plans can be flexible to your needs with you choosing how much you want to pay upfront and per month
No unexpected expenses caused by breakdowns or MOT
No big payment at the end of contract, you simply hand the vehicle back to the finance company
You can’t end your contract early even if your circumstances change
There is no option to own the vehicle at the end of the agreement
Financial penalties for exceeding mileage limit and excessive wear and tear
The vehicle can be repossessed if payments are not kept up.

Which option is right for me?

Choosing Hire Purchase (HP) or Personal Contract Purchase (PCP) all depends on if you would like to own the vehicle once you have made all your finance payments. If you do, then a HP agreement is most likely the best option for you.

If you like to change your vehicle every few years, then you are likely to be better suited to the PCP option. Depending on the value, some vehicles won’t have a PCP option. If you have any queries, please call our Finance Executives who will be happy to discuss your options.

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FAQ's

What criteria should I consider?

When lenders consider financing a vehicle, they look at a few factors such as age, mileage and value.

Most lenders will generally only finance vehicles that are less than 10 years old and have done less than 100,000 miles. When you are deciding how long to repay the finance for, you can usually choose a period of between 24 and 60 months. If a vehicle is older, some lenders may offer a shorter repayment term.

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