FROM PCP TO PERSONAL LOANS – UNLOCKING VEHICLE FINANCING AND HOW TO PICK THE RIGHT OPTION FOR YOU
Added: 15 April 2024
Vehicle financing comes in various forms, each tailored to different needs and preferences. Understanding the differences between these financing options can help you make an informed decision when purchasing a vehicle. Let's explore the most common types of vehicle financing and who each one is best for.
Below are the most popular options when it comes to financing your vehicle.
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Personal Contract Purchase (PCP)
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Hire Purchase (HP)
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Personal Contract Hire
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Personal Loan
Each of these options differ slightly from each other and will suit different people.
PCP
Personal contract purchase, or PCP, is the most popular option for new vehicles today, and consists of an initial deposit followed by monthly payments, generally for 2-4 years, and ending with an optional final payment for ownership of he vehicle. This final payment offers flexibility to the customer as they get one of three primary options:
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Don’t pay and hand thevehicle back to dealership.
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Providing the final payment is lower than the current value of the vehicle, then it can be traded in and used as a part exchange on a new deal.
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Pay the final payment and take complete ownership of the vehicle.
Details to be aware of with PCP are any potential extra charges that may come with the deal, especially if you do not end up buying the vehicle outright. Excess mileage charges and covering the cost for any maintenance upon handover will apply. PCP suits those who are looking for a brand new vehicle with lower monthly payments, and the flexibility of not having to commit to ownership.
HP
Hire purchase, or HP, was the most popular financial option before PCP, and is still a popular choice especially for used vehicles where PCP may not be provided. HP and PCP work in similar ways in terms of the contract length, initial deposit and monthly payments. However, this is where the between the two end. HP does not have a final balloon payment. This means that the monthly payments are slightly larger than PCP, however once you get to the end of your contract the vehicle then outright belongs to you. HP also avoids potential extra charges such as excess mileage as you will end up owning the vehicle no matter what at the end of the contract.
If you are looking to own your next vehicle long-term meaning you do not need the flexibility of a PCP deal, and you are comfortable with the slightly higher monthly payments, then a HP deal is perfect for you.
Personal Contract Hire
Contract hire, also known as leasing, involves renting a vehicle for a set period of time with fixed monthly payments. Unlike PCP or HP, you will never own the vehicle on a contract hire deal, instead you simply return it at the end of your contract. Due to never owning the vehicle, additional charges can apply.
Contract hire is an excellent option for anyone that wants to drive a brand new car every few years without having to worry about depreciation and other aspects of ownership.
Personal Loan
Another option you can take is through a personal loan. This provides you with a lot more flexibility when it comes to how your payments look. You can borrow the exact amount you need, pay back over the exact amount of time you want and have a lot more freedom when it comes to interest rates. Using a personal loan also means that you are able to own the car outright from the beginning and avoid any potential restrictions that may come with the other options.
If outright ownership from the start is important to you, and you are willing to shop around for the best loan you can find, then a personal loan may be for you.
In conclusion, the best car financing option depends on your preferences, financial situation, and long-term goals. Consider your priorities, such as ownership, flexibility, and budget, before choosing the financing method that suits you best.
The vehicle financing options have never been so accommodating, varied or personalised. Because of this, there is no ‘best’ option when it comes to you new vehicle. Instead, find which one of these options you identify with most and be sure to talk it through with your local Simon Bailes Peugeot sales team who can provide fantastic insight on what would work best for you.
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