You can finance a car in a few different ways. Firstly, you need to find out what you can afford to pay for your new car. This is very important as you don’t want to get your heart set on a car only to realise you cannot afford to buy it.
Before applying for finance, you need to consider your individual circumstances, how much money you have to spare at the end of each month after you have paid all other bills, and how much you want to pay, so you can still live comfortably.
At Employee Loans, we have options to suit a wide variety of circumstances. Read on to get to know more about each of them.
Personal Contract Hire
This finance option would suit you if you are looking to own the car at the end of the finance agreement, or if you want to change it every 2-3 years. A Personal Contract Hire (PCP) agreement also has the benefit of allowing for lower monthly payments. To own the car at the end of the contract you will have to pay a balloon payment. This payment will be for the amount of money the car is worth at the end of the agreement – its residual value. The amount of your balloon payment is decided at the beginning of your agreement, so you will be able to work out whether this is feasible, before agreeing to anything. Additionally, you can use the car as part exchange on your next vehicle.
Hire Purchase (HP) is an ideal car finance option for someone who would like a new or nearly new car. In this type of finance agreement, the monthly payments and interest rates are fixed and will be established at the beginning of the agreement, meaning the instalments you’ll need to pay will not fluctuate throughout. A HP agreement also gives you the choice of paying the car off early, if you would like to. This option can be flexible and will depend on your lender’s policy.
A Lease Purchase (LP) agreement is also a popular car finance option. Just like in a PCP agreement, this may be the option for you if you would like a new or nearly-new car and if you’d like to change vehicles every 2 or 3 years. If you want to own the car at the end of the finance agreement, you will have to make a balloon payment at the end of your contract and the options to return or part-exchange the vehicle will not be available.
Hopefully this has helped you understand your options and work out which one is best for you. We know car financing can seem daunting, but we aim to make it less scary and more exciting by giving you all the information you need to make an informed decision.
Need help working out which option is for you? Call us on 01202 688177, and one of our trained advisors will help you out.