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Hire Purchase is a method of obtaining goods e.g. a vehicle, pay for the use of the vehicle over a pre- agreed period and at the end of that period, once an Option to Purchase Fee has been paid, the goods become your property. Click here to find out more about Hire Purchase including important things you must consider before taking out an agreement.
Hire Purchase enables you to simply choose how much deposit you wish to pay upfront, including any part exchange and the period in which you wish to repay the balance, typically up to 5 years.
The deposit is paid on delivery of your new vehicle, leaving the balance plus interest paid over the agreed period in equal monthly instalments. At the end of the agreement, subject to a nominal option to purchase fee, you take outright ownership of the vehicle.
Interest is calculated at the start and is added to the amount that you wish to fund, therefore it is fixed for the length of the agreement. This means that the amount you pay is unaffected by any future changes in interest rates, allowing you confidence that your payments will not alter.
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A Conditional Sale Agreement is a method of obtaining goods e.g. a vehicle, pay for the use of the vehicle over a pre- agreed period and at the end of that period, the goods become your property. Click here to find out more about Conditional Sale Agreements including important things you must consider before taking out an agreement.
A Conditional Sale agreement is the same as Hire Purchase, except that you will automatically own the car once the finance has been repaid in full without the requirement to pay an additional fee. If you wish to sell the vehicle you must repay the outstanding finance balance in full.
The deposit is paid on delivery of your new vehicle, leaving the balance plus interest paid over the agreed period in equal monthly instalments. At the end of the agreement, you take outright ownership of the vehicle.
Interest is calculated at the start and is added to the amount that you wish to fund, therefore it is fixed for the length of the agreement. This means that the amount you pay is unaffected by any future changes in interest rates, allowing you confidence that your payments will not alter.
BENEFITS:
CONSIDERATIONS:
A Personal Contract Purchase (PCP) is a method of obtaining goods e.g. a vehicle through a pre -agreed fixed term finance agreement with part of the cost deferred until the end of the agreement. This may give the benefit of lower monthly repayments or a shorter period of repayment. Once all of the repayments, including the deferred payment and any fees are paid, the goods become your property. Click here to find out more about a Personal Contract Purchase including important things you must consider before taking out an agreement like what happens if you exceed your agreed mileage allowance.
A PCP is more suited for those that wish to enjoy the benefits of upgrading their vehicle every two or three years. A Personal Contract Purchase is a variation of a hire purchase agreement which offers monthly payments that are lower than some traditional finance schemes by offsetting a larger repayment to the end of the agreement.
Instead of purchasing the vehicle over equal monthly instalments an Optional Final Payment, sometimes called Guaranteed Minimum Future Value, is deferred until the end of the term. Meaning that you are paying the difference between the vehicles sale value and its minimum worth at the end of the period. The final payment is calculated based upon your driving requirements and annual mileage. Exceeding the agreed annual mileage will result in a pence per mile charge, as the higher the mileage the less the vehicle is worth.
Your repayments are based upon the price of your vehicle less any deposit and the Optional Final Payment, plus interest charges and any fees.
It is important to note that due to market conditions your vehicle may not be worth more than the Guaranteed Minimum Future Value at the end of the agreement, thus affecting the deposit available to purchase you next vehicle and subsequent monthly repayments. Therefore, it is imperative that you ensure that you accurately predict your mileage over the term, as any additional mileage is subject to an excess mileage charge.
Your options at the end of the agreement;
I.Renew – you can part exchange your vehicle at a dealership and start over again. If the vehicle is worth more than the Final Optional Payment, you can use the difference as a deposit
II.Retain Ownership – You may prefer to keep the vehicle, to do this you are required to pay the Optional Final Payment in full. Some finance providers will allow this value to be refinanced at the prevailing interest rate.
III.Return – If your needs or requirements have changed you can hand the car back to the dealer with nothing more to pay (subject to mileage and condition. Excess mileage charges may apply)
BENEFITS: