PCP, PCH, OR HP? Car finance explained
In the world we live in today, it is in the best interest of an individual to finance or lease a car, due to the rise in the prices today, looking for the best car can be very challenging, and another challenge is actually paying for it. If you decide to lease your car, then you should know the following.
Determine the price of the car that you can afford
It is best that you know your financial status before you think of getting a car, you also need to know if your financial situation can sustain you on a monthly basis. So, it is important that you make a budget that will guide you in your spending. There are questions people might ask like:
Should I begin a new payment method?
Before taking on the challenges of a car, you have to know if you can take that challenge and get a new payment method, also saving to make a payment can also help for a new car or you can also trade your car with some payment which could reduce the amount you might pay.
Can I make a trade-in?
For individuals who need a new car, they can trade a car for the new one, which will ease the down payment of the new one. However, if money is owed on the old one, then trade-in will not be quite helpful, but there will be negative equity if you owe more than what the car is worth.
Should I use financing to buy a car?
With this method, you can lend money directly from your bank, a financial company, etc. however, there is a catch, you will need to sign an agreement to pay the amount you are financing and a charge over a particular time, once you are ready, you can use it to pay for your car.
Here are some financial plans to guide you in making a decision that is right for you.
Hire Purchase (HP)
For an individual to apply for this method, first you will need to pay an initial deposit which could be any amount depending on the plan and then you can begin to make installment monthly. There must be a signed agreement between the buyer and the seller; the following must be clearly written for the agreement:
What the agreement is all about.
The amount meant to be paid for the vehicle.
The buyer must know the amount needed to pay back (interest).
The initial deposit.
How much is needed for the monthly installment?
A statement showing the right to cancel the agreement when there is a cool-off period.
The right for the seller to cancel the agreement with a genuine reason.
How does hire purchase work?
During this process, you will need to put 10% of what the value of the vehicle, then the rest will be paid in installments; it could be in the period of 1-5 years. The use of an HP is usually done with a car dealer, but a car broker can also use this method. The percentage rate depends on the quality of the car; if the car is used, then the car rate can differentiate between 4%-8%, therefore the lower the number, the better your chances. One of the reasons why the rate could go higher would be because of a good credit score. It is advisable to know the terms and conditions you are signing into.
Advantages of hire purchase
The flexibility of the plan is easy, the payment term could vary from 1-5 years, which could help your budget, but if you apply for a longer term, then you might need to pay some interest.
A low deposit, this requires about 10% of the car’s price.
There will also be a fixed payment, which can be paid during your agreement.
Tips for getting the best hire purchase deal
There are various options to approach with this deal:
Get a financial deal from where you are buying the car from; this is the usual method.
You can also get your finance from an online broker.
Personal Contract Hire (PCH)
This is considered to be a long term contract for cars, this term is known as a lease period, even though you might be using the car, it is actually not going to be yours. With this method, you can make a fixed monthly payment during the duration of the agreement.
During the time the contract expires, the agreement states you used to return the car to the leasing company, or you can also take a new lease, the use of the personal contract hire can be used to take possession of a car during a contractual period. PCH is also known as leasing, the value of a car usually depreciate when the car ignites.
How does car leasing work?
When applying for a lease agreement, you agree to the fact that you will hire a car over a period of time. You will need to pay an initial rental, which will be followed by a monthly payment of the agreement. It is recommended that you how the payment works. It is left to the leasing company to determine the residual value of the vehicle, which is why the leasing company would want you to maintain a certain limit you can drive a car.
For the payment method, the leasing company would subtract the residual value from the merchandising price for the car, so at the end of the agreed contract, you can return the car in a good shape and with the proper mileage agreed.
Personal Contract Purchase (PCP)
This plan is quite similar to the hire purchase plan; this is a very popular plan for financing a car. Usually, there are a lot of people who will agree to buy a car over a period of time. Using the personal contract purchase requires you have a long-term payment for your cars, which allows you to use the said car before the contract ends, so as soon as the contract ends, you can:
Return the vehicle to the leasing company.
Make payment value for the resale value.
Then, you can use the resale value to get a new car.
How does a Personal Contract Purchase work?
Pass your credit check
Before you apply for a personal contract purchase deal, you will need to know if you can meet the payment time of the company based on the term you agreed on.
Make a deposit
An initial deposit must be made; it is usually a 10% value of the car. This will be said in your terms and condition.
You will be allowed to use the car
Once you’ve met the criteria, you will be given the car, but that doesn’t mean that you own the car, there will be a need for you to make payment during the time of the contract. There is a need for you to maintain your mileage limit during this time because there will be some charges if the rule is violated, also don’t damage the car before the contract ends.
Spencers Car Sales Ltd can offer you both hire purchase (HP) and personal contract purchase (PCP).
We can offer competitive car finance plans to suit all budgets.
If you have been refused car finance in the past please get in touch we can also assist you.
We are partnered with Close Brothers Motor Finance, Blackhorse Finance and Blue Motor Finance.
Whether you are looking to purchase a prestige, sports, 4×4 or light commercial vehicle, we will be able to assist with your vehicle financing needs.
Financing your used car through Spencers Car Sales Ltd could not be any easier.
To enquire about our competitive finance packages, simply complete our finance application form at the bottom of the page.
If we have any questions we will be in contact with you very soon.
Alternatively you can call us and speak to our sales team to discuss your specific requirements.
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