Despite the huge growth in leasing, both for business and for personal use, there still remains a place for the traditional purchase finance. Here is a quick rundown of these options, and we can help you with these if required. These range from traditional Hire Purchase, and it’ s modified form Personal Contract Purchase( sometimes incorrectly also called leasing), to Personal Loans. There are some more specialised options, if you would like to hear about them, please contact us.
The biggest drawback of all of these is that as soon as you take the car, not only is there interest on the cost, but the car’ s depreciation directly affects you. Once the finance is paid off, the car is then yours and you would no longer have a monthly payment. However, you will always be subject to depreciation over time. This is fine if you are happy to run the car the end of it’ s life and all associated repair and maintenance costs with doing this.
Personal Contract Plan
This shares some similarity to leasing, which is why some people use this term to describe it. With a PCP, you will pay a deposit( usually capped at around 30 % of the on the road cost), and have a regular monthly payment. There will be a set end point at 3 or 4 years, with a Guaranteed Minimum Future Value. At this point you can do one of three things. Either hand the car back to the finance firm, part exchange for new model and see what— if any— equity is left in the car, or buy the car out for that set value. This is probably the best option if you want the option to own a vehicle, but has higher risks involved than a lease.
Hire Purchase
This has always been the traditional way to fund a vehicle. You pay a deposit on the car and the balance in full over the term of the finance. Normally this will be set to 5 years to minimise the monthly payment. But outside of a few manufacturers, this would mean potentially 2 years out of warranty over the course of it, and the payment will remain the same right the way through the agreement. The drawback of this form of purchase is that until you have had the car for 3-4 years, it can be difficult to avoid negative equity, and so harder to change your car.
Personal Loan
This is the least preferred way of funder a car, effectively using an unsecured bank loan to fund the price of the vehicle. There are far few protections and options for a consumer in these, and make it harder to part-exchange your car if you come to change. These are most often seen where a previous car had a large amount of negative equity which couldn’ t be funded on hire purchase options.
We are happy to discuss any of these funding options with you, but it’ s not by accident that there is a huge growth in leasing vehicles over buying them in the UK. Our view is to look at your car like any other consumer product, the best example is like a smartphone. Why buy it outright at a higher cost, to then have to pay the same high cost when it comes time to change in a few years to keep up with the market. By leasing your new vehicle, you can enjoy paying less, whilst having the most up to date model.
We hope you have found this guide helpful, and look forward to hearing from you to help you find the best deal for you on your next car lease.
9: @ KingoftheRoadUK: Simplicity Cars: http // www. simplicity-cars. co. uk: andy @ simplicity-cars. co. uk