Car Finance

Personal Contract Purchase (PCP) is a popular way to finance used vehicles, providing lower monthly payments compared to a Hire Purchase (HP) agreement. With PCP, you finance the difference between the car's initial value and its guaranteed future value, which is determined at the beginning of the agreement. 

At the end of the PCP agreement, you have three options: 

1. Return the car to the lender
2. Purchase the car by paying a final balloon payment (which is the predicted guaranteed minimum future value)
3. Part exchange your vehicle - any equity remaining in the vehicle can be used as a deposit on a new car. 

PCP offers affordability as you are only financing part of the car's value. You are instead deferring a large sum to the end of the agreement, which reduces the monthly payments and allows you to choose a newer and more expensive car. If you do not want to pay the final balloon payment and own the vehicle at the end of the agreement, a PCP offers flexibility at this stage, making is suitable for you if you want the ability to switch cars regularly. 

However, if you want to own the vehicle, PCP may not be the ideal solution as you don't own anything until the final balloon payment has been paid. If you choose to return the vehicle at the end of the agreement, there can also be additional charges for excess mileage or damage. 

A Hire Purchase (HP) agreement is a popular financing option for used cars. You will essentially hire the vehicle over a specified period with the aim of owning it at the end. The lender will remain the owner of the vehicle until the end of the agreement. 

You make the fixed monthly payments for the duration of the agreement which is typically 3-5 years, covering the full cost of the car plus interest. 

Once all payments are paid, including any option to purchase fee or completion fee which is detailed in the agreement, the car becomes yours. 

While an upfront deposit is typically required for a used vehicle HP agreement, there are 'zero deposit' options available depending on your circumstances. 

HP agreements are best suited for individuals who intend to own the car and are comfortable with regular payments over an extended period. It allows you to distribute the cost of your vehicle over time, making it more manageable and affordable. 

However, if you prefer to switch cars frequently, HP may not be the most suitable option as you must settle the agreement before owning the vehicle. This can be done by paying the remaining balance or part exchanging the vehicle with a dealer.