Which kind of finance is right for you?

Car finance can be overwhelming and with so many different options how do you know which is the most suitable package for you? To help you understand, we've broken down all the options below to give you a clearer idea of what's what when choosing how to finance your vehicle.

Hire Purchase (HP)

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If you choose to pay for your car with a Hire Purchase (HP) agreement, you will normally pay an initial deposit, choose the length of your agreement (usually 1–5 years) leaving you with a monthly payment amount.

Once we’ve approved the finance application, it’s yours to drive away. And once all the installments have been paid, you own your car.

    • It’s a fixed rate loan (it will remain unaffected by changes in interest rates).
    • You can choose the length of your agreement (12 - 60 months)
    • You will own the car at the end of your agreement
    • You’re more likely to be accepted for hire purchase than a personal loan from your bank if your credit rating isn’t great.
    • You may need a larger deposit to allow you to have more affordable monthly payments
    • Monthly payments can be higher than on a lease or a PCP agreement
    • You won't own the car until the final payment is made

Representative Example Of A Hire Purchase Agreement

ModelSwift SZ-T Hybrid
Duration of agreement49 months
Initial payment£278.69
47 monthly payments£278.69
Final payment£288.69
Cash Price£14,499.00
Cash Deposit£1,594.89
Manufacturer Contribution£750.00
Total Deposit/Part Exchange£2,344.89
Total Amount of Credit£12,154.00
Total Charge for Credit£1,511.70
Total amount payable£16,010.70
Admin Fee£0.00
Purchase Fee (inc in payments below)£10.00
Representative APR5.9% APR
Interest rate (fixed)5.71%

Personal Contract Purchase (PCP)

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Personal Contract Purchase (PCP) is extremely popular. Similar to a HP agreement as you will usually pay an initial deposit, followed by monthly installments but what makes PCP different is that your monthly installments are only paying off the depreciation of the vehicle, rather than the entire value.

In simple terms this means that the money you're actually borrowing and repaying is the difference between what the car is worth now, and what it will be worth at the end of your contract (the depreciation). You'll pay this difference in monthly instalments.

    • Cost effective - lower monthly payments
    • Sizable deposit contributions are often offered on PCP contracts
    • Allows you to change cars more often
    • You will have to make a decision at the end of the contract as to whether you wish to sell the vehicle, return it or keep it
    • A charge will be made for excess mileage if the contract mileage is exceeded
    • You must have fully comprehensive vehicle insurance

Representative Example of a PCP Agreement

ModelSwift SZ-T Hybrid
Duration of agreement49 months
Initial Payment£188.41
47 monthly payments£188.41
Optional final payment£5,171.00
Cash Price£14,499.00
Manufacturer Contribution£750.00
Total Deposit£2,344.89
Amount of Credit£12,154.11
Total Charge for Credit£2.060.57
Total Amount Payable£16,559.57
Admin Fee£0.00
Purchase Fee£10.00
Representative APR5.9% APR
Interest rate (fixed)5.72%
Annual Mileage6000
Excess Mileage4 pence per mile

Personal Contract Hire (PCH)

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Personal Contract Hire (PCH) is a long-term rental for those that are not looking to buy the car at the end of their contract.

After paying an initial deposit (which can be equivalent to 3, 6 or 9 months' worth of instalments) you then make set fixed monthly payments for an agreed period of time. When the contract expires, you simply return your car or take out a new contract on a new vehicle.

The main difference a PCH and a PCP agreement is that with PCP you have the option of keeping the car at the end by making the ‘balloon payment’. This isn't an option with PCH and it's essentially a form of long-term car hire rather than a way to own a car outright

    • Flexible initial payment
    • You only pay for the use of the vehicle
    • No depreciation risk or disposal risk
    • Fixed-cost motoring
    • Maintenance payments can push costs up
    • Recharges to be made for damage (not fair wear & tear)
    • Early termination can be expensive
    • You won’t own the car after the agreement ends

Representative Example of a PCH Agreement

ModelSwift SZ-T Hybrid
Advanced Rental£699.84
49 Monthly rentals£233.28
Mileage Allowance9000

Personal Loan

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A Personal Loan is a loan from your bank, building society or another finance provider which is paid to you in a lump sum. Unlike the other kinds of finance we've mentioned, a loan isn't secured against the car you are purchasing so once you have the money you can spend it on whatever you like but as with anything that's borrowed, it has to be re-paid!

Interest rates vary from lender to lender and differ depending on how much you're borrowing and over what period so it's important to always shop around to find the best APR (or annual percentage rate, which includes charges you have to pay as well as the interest).

    • Can be arranged over the phone, internet or face-to-face
    • Can be for the whole cost of the car, or for a part of it
    • You own the car while paying off the loan so if you got into financial difficulties you could sell it. Check with the lender this would be the case before taking out the loan
    • Good fixed interest rate if you shop around and have a good credit rating
    • You might need to wait for the money to come through, although some lenders make funds available almost immediately
    • Personal loans aren’t always the cheapest way of borrowing. Sometimes car dealers offer 0% or very low interest deals incentivise buyers, often on a ‘flat rate interest’ basis. But make sure you also ask what the annual percentage rate (APR) is as well, as it includes all other charges as well as the interest. When comparing loans, always focus on the APR and the total amount payable
    • Taking out a personal loan might affect your credit rating. Be careful about this if, for example, you’re also planning to take out a mortgage
    • You're more likely to be accepted for car finance than for a personal loan

What to do when you're ready to buy

Once you’ve chosen your next car it's best to contact us to discuss things in detail so we can ensure you've selected the best option for you. We'll run through a set of questions which allows us to establish your 'demands and needs' and based on your answers we will then provide you with a personal recommendation to suit your individual requirements. You can be sure you're in safe hands as we are authorised and regulated by the FCA (Financial Conduct Authority).

You can apply for finance online and once we have a decision we will contact you to discuss your options in full.

Apply for finance here