Car Finance

Who can apply? 

We welcome applications from anyone aged 18 or over, and who lives in the UK.

What documents would I need? 

You only need your debit/credit card and your drivers licence, as a form of identification.

What if I have a bad credit rating? 

If you have a bad credit history, you can still apply for finance. The company dealing with your finance will look at your personal circumstances, such as your employment status, income, loan size and age. They may also take a look at your credit history. You’ll then get your exact interest rates and payments.

What is APR? 

Annual percentage rate (APR) is the interest rate applied to your loan. Essentially it’s the yearly cost of your borrowing, you’ll pay this on top of the sum you applied for. If you take out a long-term loan, the total amount payable will be more as you’ll be paying interest for a longer amount of time.

What is the difference between the representative rate and exact APR? 

Not everyone has the same credit profile, which is why not everyone is offered the same APR when borrowing money. Lenders will use representative APR to advertise rates. The reperesentative rate is chosen by looking at the lowest APR where 51% of the people have been accepted. Once a credit check has taken place, the lender will decide if you are eligible for the representative rate or a different rate.

What is PCP? 

A personal contract purchase (PCP) is a finance method which offers fixed low monthly payments with plenty of options at the end of the agreement. With PCP, you're paying off the depreciation of the vechicle and not its entire value. At the end of the agreement, you have the option to return the car with nothing more to pay. You can also purchase the car by making a baloon payment. The amount you have to pay depends on the value of the car in the future. If you decide to keep the car, you'll have repaid the full cost of the car. Another option you have is part exchanging the car for a new or used vechicle.

Pros

  • ✔ Monthly payments are often lower than a loan or hire purchase.
  • ✔ Flexiblity at the end of the agreement.
  • ✔ You can drive away with a new or used car every few years without worrying about resale.
  • ✔ If your car is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new car.

Cons

  • ✖ If you want to keep the car you will have to pay a final balloon payment.
  • ✖ An annual mileage will need to be agreed, there may be a charge if it has been exceeded.
  • ✖ You are not allowed to modify the car unless you get authorisation from the finance company.

What is HP? 

Hire Purchase is a finance option which allows you to purchase a car outright and pay in monthly installments over an agreed period. The monthly payment amount is decided by the cost of the car, interest rate and the length of your agreement. A HP agreement can last between one to five years, and you don't own the car until the final monthly payment has been made.

Pros

  • ✔ Fixed interest rates so you know exactly what you’re paying every month for the length of the term.
  • ✔ No excess mileage charge, as there is no mileage restriction.
  • ✔ You own the car after the final monthly payment.
  • ✔ You don’t need to make a large baloon payment to purchase the car unlike PCP.

Cons

  • ✖ Due to paying the entire value of the car, monthly payments can be higher.
  • ✖ You can't sell the car without settling the finance.
  • ✖ You can’t modify the car whilst under contract without getting permission first.
  • ✖ It can be an expensive route if you are after a short-term agreement.

What is PCH? 

Personal Contract Hire (PCH) is a long term rental that offers low monthly payments for brand new car. You pay an initial fee and then fixed monthly payments throughout the lease. You get to choose how long it should run - which is normally between two and four years. At the end of the lease, you return the car with nothing more to pay and there's no option to buy the car at the end.

Pros

  • ✔ One fixed payment a month.
  • ✔ Often the cheapest way to drive a brand new car.
  • ✔ Avoids risk, as you're not affected by an unexpected drop in value.
  • ✔ Maintenance fees can be included in the agreement, this eliminates unexpected repair bills.

Cons

  • ✖ You have to return the car at the end, with no option of buying it.
  • ✖ An annual mileage will need to be agreed, there may be a charge if it has been exceeded.
  • ✖ It's rare for PCH to be offered on used cars.
  • ✖ You may have to pay a charge if you end the lease early.

Finance comparison

PCP HP PCH
Deposit required ✔ ✔ ✔
Fixed monthly payments ✔ ✔ ✔
Mileage caps ✔ ✖ ✔
Fines for excess wear and tear ✔ ✖ ✔
Depreciation risk ✖ ✔ ✖
Own the car outright ✖ ✔ ✖
Baloon payment at the end ✔ ✖ ✖
Early redemption charges ✔ ✔ ✔
Secured against an asset ✔ ✔ ✔

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