What is car finance?
If you’re in the market for a new car, chances are it’s an exciting time. You might be paying outright, or you might be looking at finance. If you’re stuck to know which way to go or not sure how finance works, read on for our guide to car finance.
There are a few types of car finance but really, it’s the process of spreading the cost of the vehicle over a set number of months or years instead of paying for it in one large chunk.
HP – Hire Purchase
Hire Purchase is a common way to finance your car. You will normally pay a small deposit and borrow the remainder from a finance company or lender. You will make monthly payments against what you have borrowed. Once the final payment has been made and you no longer owe any money, the car will then be yours. Drive into the sunset or your favourite City Centre hot spot to celebrate.
PCP – Personal Contract Purchase
Personal Contract Purchase is like Hire Purchase but with a few key differences. Once you reach the end of your agreement, you will have a few options:
- Return the car
- Pay a balloon payment to keep the car (this will be based on what the car is worth and will be detailed in your plan and agreement)
- Use the car against another finance agreement…
With either type of finance, it is important to make sure you can keep up with the payments before you commit to the car. You should also check your finance agreement for terms and conditions, mileage restrictions and additional fees. If you don’t understand anything, make sure you ask before you sign anything.
There is our starter guide to car finance. If you have any questions or want to find out more, get in touch with the team at Instant Car Finance and find finance for your car in Manchester.