Car Loans

Personal Contract Purchase (PCP)

Many people use the personal contract purchase option – especially if they like switching cars every few years. These car loans work differently to personal loans, in that you pay a smaller monthly fee – plus, you don’t have to pay off the loan completely. When the initial loan term ends, you’ll have the option of buying the current car you use, or switching to a new one.

Most dealers have a set deposit, such as £2,000, and you’ll be expected to pay this amount before the term begins. Once the finance company determines how much the car will be worth by the end of the repayment period, you’ll pay the difference.
 

Pros of PCP cars loans:

• PCP is ideal if you like to switch cars regularly
• You won’t have to pay back the total value of the car
• You have the choice of buying the vehicle when the repayments finish

Cons of PCP loans:

• You’ll never own the car
• If you want to keep the vehicle, you’ll need money for the final payment
• Most lenders have maximum yearly mileage restrictions

Hire purchase (HP)

Hire purchase agreements are one of the most popular borrowing solutions because you don’t need an excellent credit score to access them. In many ways, HP finance is similar to a secured loan because the company owns the car until you pay the amount off in full.

It’s similar to a secured loan because the company will seize the car and use it to recover the outstanding amount if you don’t meet your payment obligations.

One of the good things about HP financing is you don’t always have to pay a large deposit, but you are tied into strict repayment terms as the lender will want to make money back through interest.
 

Pros of HP loans:

• They’re flexible
• Deposits are usually set at 10% of the car’s retail price
• You’ll own the car when you complete the repayments

Cons of HP loans:

• You’ll have to factor in the interest rates
• You’ll lose the car if you don’t meet your repayment obligations

Using a credit card

Another solution to buying a new or used car is to use your credit card. However, it depends on your credit history and if you have access to a 0% card. Some people choose to buy used cars through credit, but you might not be able to buy a new one.

Considering that the average credit limit in the UK is between £2500 to £4000, there are limited options with credit cards.

Also, many people use their credit cards and decide to pay back the money later, which seems fine – but after the 0% interest rate term finishes, you’ll have to pay more.

Personal contract hire

Last but not least is personal contract hire. These agreements allow people to get a brand new or barely used car and pay back a set amount to use it each month. While other car loans work on a pay-to-own basis, PCH agreements mean you only rent it.

Once you pay the deposit, you can choose the maximum yearly mileage allowance and be responsible for maintaining the car. However, it’s a great solution if you want to drive a brand-new car without a big financial commitment.
 

Pros of PCH:

• PCH is one of the more flexible options
• You don’t have to worry about high-interest rates
• It’s more convenient than a long-term rental

Cons of PCH:

• You’ll never own the car
• After the rental term finishes, you’ll need to find a new contract

How to choose the right car loan for your needs

With so many car finance options available, it’s challenging to know which is best for your personal circumstances. Asking yourself the following questions will make the decision a lot easier.

Is owning a car important?

While the idea of PCH or PCP car finance might appeal because of the lower fixed monthly repayments, there’s not as much security as you’d get with personal car loans. You’ll pay a deposit and a set amount back each month, but you’ll have to pay an upfront fee if you want to keep the car after the term ends.

Can you afford to buy a car outright?

Of course, if you can afford to pay for the new car outright, it might be the best way to avoid getting into debt. You won’t need to factor in a monthly payment amount, giving you more financial security.

However, if you don’t have the money to buy a good car, applying for a car loan might be better. Buying a cheap second-hand vehicle just for the sake of having a car might seem like a great idea, but you don’t know what you’re getting and could be wasting your money on a broken car that’s been made to look good.

We work for you, not against you

When you choose to work with us, we ask you how much you want to borrow and go out of our way to find the best lender for your needs. You can look forward to a personalised quote and lenders who adapt themselves to your requirements.

The main drawback of mainstream loan providers is that they use set eligibility criteria, but our specialist lenders judge each case on a personal basis.

Choose an award-winning team

We dedicate ourselves to customer service, and our commitment to your financial future makes us a successful broker. As an award-winning team, we’re confident that our brokers will find a great deal for you.

We’ll also help you apply online and find the right loan term for your needs.

Why Use Believe Money?