Which Car Finance Plan is Right For You? |
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Will Hope
30 June 2017
In the modern world of motoring, there are more ways for people to afford a new car than ever before. Buying a car outright is becoming a less popular option, as leases and purchase agreements offer more affordable alternatives. However, with so many different options available, Car Finance may feel a little confusing - even overwhelming. Here is a a run down of Car Finance Options to help you to decide which one is right for you.
Personal Contract Purchase (PCP)
PCPs work by allowing people to pay off the difference in value between a car’s current worth, and its estimated value at the end of the contract (the Guaranteed Future Value (GFV). The GFV is calculated by your finance company at the beginning of the contract; this amount accounts for the vehicle’s future depreciation in value. Although an initial deposit is required, PCPs generally have lower monthly payments, and can therefore offer a more affordable option. There is also the opportunity to buy the car at the end of the contract. This is a flexible option - you can either buy the car for the GFV at the end of the contract, take out a new PCP on another car or simply walk away.
Hire Purchase (HP)
HPs enable car buyers to pay off the entire value of their car in monthly instalments. However, the car remains the property of the lender until the final monthly payment is made. Monthly payments are relatively high in HP agreements due to the fact that the full value of the car is being repaid. However, there are no excess mileage fees, so no unexpected surprises. This could be a good option for someone who wants to own a car but is unable to buy outright.
Leasing
Leasing is an affordable and flexible way for people to get behind the wheel of a brand new car. Monthly payments are made until the contract expires; at this point the car must be returned, but a new lease can now be taken out on another vehicle. Leasing a car avoids the perils of depreciation, and you can add maintenance packages to suit your requirements. Car leasing companies such as car4leasing offer many benefits such as road side assistance, road tax for the duration of the contract and a full manufacturer’s warranty. Leasing makes driving a new car a viable, cost-effective option and avoids the inherent costs of maintaining an older vehicle.
Renting
Renting could be a viable option for people who do not not need regular use of a vehicle. Renting a car for a few days over the course of a year instead of owning or leasing could save you hundreds of pounds; the cost of road tax and insurance costs alone quickly add up. Renting gives you the peace of mind that a car is available for you when you need it, without the additional worry of maintenance or additional expenses.