When it comes to purchasing a new car, there are various finance options available in the UK, making it easier for you to afford your dream vehicles without straining your budgets.
Three popular car finance options are PCP (Personal Contract Purchase), PCH (Personal Contract Hire), and HP (Hire Purchase). In this blog post, we'll delve into the details of each option, explaining their features, benefits, and considerations, to help you make an informed decision when choosing the best car finance option for your needs.
Personal Contract Purchase (PCP):
PCP is a popular car finance option that offers flexibility and lower monthly payments compared to traditional Hire Purchase agreements. With PCP, you agree to make fixed monthly payments over a predetermined period, typically two to four years. These payments cover the car's depreciation and interest, making them more affordable.
At the end of the PCP term, you have three options:
a) Purchase the car: You can pay a pre-agreed "balloon" payment (the Guaranteed Minimum Future Value - GMFV) to own the car outright.
b) Return the car: If you decide not to keep the car, you can return it to the dealer, and you won't have to worry about the car's future value.
c) Part-exchange for a new car: You can use any equity left in the car after settling the GMFV as a deposit for your next car.
Advantages of PCP:
- Lower monthly payments compared to HP or outright purchase.
- Flexibility at the end of the agreement to choose between ownership and returning the vehicle.
- Opportunity to drive a new car more frequently, as you can upgrade every few years.