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Car Finance: Explained

When trying to get a new car for yourself, there are a range of different paths in which you can take, with finance being one. People tend to throw this word around often, without knowing what it’s actually all about – it’s simple once you understand.

Once you’ve found the option best suited to you, it’s as easy as 1,2,3.


Personal Loan

With there being various different options within car finance, this has been voted the most popular for the simple reason that it’s the easiest way of getting finance. All you have to do is contact a bank, building society or some other lender and borrow a certain amount of money, once you get accepted, the car will them become your own.
You need to keep your eye on the APR rates, which is the main thing with getting a personal loan. Be prepared to do your homework and compare in order to get the best rate. You’ll be best off choosing this option if you have no deposit but you want ownership of the car you’re driving. As well as this, if you need a car for business purposes, this option allows you to travel as many miles as you’d like – there are no restrictions.
In order to find out how much you’d have to pay, try using a car finance calculator – this is a big help and it gives you a rough idea.

Personal Contract Purchase (PCP)

This is probably the most recognised form of finance and is the second most popular option, closely following Personal Loans. It’s a simple and straight forward option in which a deposit of any value is needed, but the higher the deposit, the lower the monthly payments.
The good thing about a PCP deal is that the interest rate never varies, just like the monthly payments are fixed and paid over a certain amount of time. At the end of the term, you can either return, swap or own the car so whichever suits you best, you’ll have no issues.
If you want to opt for ownership, a balloon payment is needed.

Personal Contact Hire (PCH)

A Personal Contract Hire deal is pretty similar to a Personal Contract Purchase in the sense that you pay fixed monthly payments for usually 24 months, but this does vary depending on how long you want the car for. The biggest difference is that a PCH is more of a long-term rental of a car which you only need a low deposit for and you then return the car at the end – how easy is that?
Finding a car with low depreciation costs would be the best option because you’ll have cheaper monthly payments.

Hire Purchase

If you decide to go with a Hire Purchase, this is actually one of the easiest ways to go about getting car finance because of how straight forward it is.
First of all, you pay a large deposit at the beginning of the contract in order to pay off a little bit of the car, then you go onto paying fixed amounts each month to pay off the rest of the value. Once the car has been paid off, the car then becomes your own.

Are you worried about your credit rating? It’s understood that a low credit score can hold you back when it comes to getting car finance, but fear not, bad credit car finance options are now available.

Representative Example of Credit

We expect more than 51% of our customers to achieve this rate.

Loan AmountTotal Cost of CreditRepresentative APR48 Monthly PaymentsDeposit AmountLoan TermTotal Amount Payable
£7,500£3019.1619.1% APR£219.77£048 Months£10,519.16

We are a broker not a lender and our registered office is Trident Park, Trident Way, Blackburn BB1 3NU. Our contact number is 01254 919000

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