Car finance options
Hire-Purchase or Conditional Sale
YOU agree with the DEALER the amount you need to borrow (less any deposit and part exchange). 
DEALER then contacts the MOTOR FINANCE COMPANY which (subject to credit checks) pays for the car on your behalf. YOU repay the MOTOR FINANCE COMPANY usually on a monthly basis, for the length of the agreement. YOU do not own the car UNTIL you make the final payment. NOTE: In some hire purchase agreements (called Lease Purchase) this end payment can be higher in order to reduce your monthly payments.
Advantages of hire purchase are:
quick and easy to arrange low deposits (usually from 10%) flexible terms (usually from 12 to 60 months) competitive fixed interest rates additional protection available - GAP Insurance, Used Car Warranty, Vehicle Replacement Cover Personal Contract Purchase (PCP)
YOU agree with the DEALER the amount you need to borrow (less any deposit and part exchange). DEALER then contacts the MOTOR FINANCE COMPANY which (subject to credit checks) pays for the car on your behalf. YOU make reduced monthly payments to the MOTOR FINANCE COMPANY making YOUR car more affordable by putting off (deferring) part of the cost until the end of the agreement. During the agreement YOU pay only for the difference between the full loan and the deferred amount, plus an interest charge. At the end of the agreement YOU can
PAY OFF the deferred amount in full and keep the car (you do not own the car until you make the final payment) HAND THE CAR BACK to the dealer and walk away (subject to the terms and conditions) TRADE THE CAR IN against another car and use some of the money raised to make the deferred payment Advantages of Personal Contract Purchase: lower monthly payments low deposits (usually from 10%) flexible terms (usually from 12 to 36 months) choice of options at end additional Protection available - GAP Insurance, Vehicle Replacement Cover Personal Leasing (Personal Contract Hire)
YOU agree with the DEALER a fixed monthly payment to rent the car, usually including all service and maintenance over an agreed period. The DEALER then contacts the MOTOR FINANCE COMPANY which (subject to credit checks) pays for the car on your behalf. YOU pay the MOTOR FINANCE COMPANY the fixed monthly rental. At the end of the agreement you hand the car back to the DEALER/MOTOR FINANCE COMPANY (subject to the agreed contract mileage not being exceeded) – there is no option to purchase.
Advantages of personal leasing are:
fixed cost motoring no depreciation risk, no part exchange very flexible terms additional protection available - GAP Insurance, Vehicle Replacement Cover Personal Loan
YOU organise the money for the car by taking out a personal loan with a BANK or other FINANCIAL INSTITUTION. YOU choose your car at the dealership and pay the DEALER with the money you have borrowed. YOU repay the BANK/FINANCIAL INSTITUTION you borrowed the money from You own the car from the start and it is your responsibility – you pay for repairs/servicing. You can also sell the car when you want. YOU will need to continue paying the BANK/FINANCIAL INSTITUTION until the loan is paid off
Advantages of personal loans are:can be arranged over phone or internet can pay for whole cost of car competitive fixed interest rates Mortgage top-up
YOU organise with your MORTGAGE PROVIDER to borrow money – either by withdrawing equity from your house or by getting a second mortgage. YOU choose your car at the dealership and pay the DEALER with the money you have borrowed from your MORTGAGE PROVIDER YOU repay your MORTGAGE PROVIDER The car is yours and also your responsibility – you pay for repairs/servicing. You can also sell the car when you want. YOU will need to continue paying the MORTGAGE PROVIDER until the loan is paid off. Your house could be at risk if you do not keep up the repayments.
NOTE: Mortgage loans tend to be over longer periods and this may not match your pattern of car ownership. Watch out for penalty clauses if you try to repay the loan early.
Advantages of mortgage top-up are:low interest rates dealing with an existing lender Credit card
It is possible to buy cars on a credit card but cards should only be used for short term borrowing, such as paying a deposit or when you are waiting for other finance to become available.
Interest rates on credit cards are higher than many other forms of finance and they are not recommended for high value items.
Advantages of credit cards are:
short term borrowing paying deposits
