Finance is one of the most popular ways of paying for a car. At David Hayton, we’re able to offer a variety of finance solutions to meet any requirement, so if you’re looking to get behind the wheel of a used car and spread the cost of payment, finance could be the best way to go.
Personal Contract Purchase (PCP) and Hire Purchase (HP) remain two of the key options if you’re looking into finance, but how do they differ, and how could each work for you? We’re checking out everything you need to know in this article.
What is PCP?
PCP is one of the most common ways to finance a car today. With it, you’ll pay a deposit at the beginning of your contract and then make regular monthly payments over a pre-agreed term. These payments will cover the cost of the car, minus the deposit and a final ‘balloon’ payment, as well as interest.
Most finance agreements last between three and five years, and during this time, you’ll have full use of the vehicle, but you won’t own it outright.
What about the balloon payment?
That final payment, which you’ll often see referred to as a ‘balloon payment’, covers the cost of the remaining portion of the agreement. If you want to own the car outright, then you’ll need to make this final payment. However, you’re under no obligation to do so. If you’d rather not make that final payment, then you can simply return the vehicle to the lender and exit the agreement without having to pay anything else.
What are the benefits of PCP?
One of the key benefits of PCP is lower monthly costs. Through this mode of finance, you’ll usually get smaller monthly payments, though that final balloon payment can often be quite large.
But PCP is a great option if you like to change your car frequently, as, at the end of the agreement, you can simply hand the car back and start a new finance policy on a different vehicle.
Is there a mileage limit?
Yes. In nearly all finance agreements, you’ll find that you’ll need to stick to agreed mileage limits. On most vehicles, this is between 5,000 and 10,000 miles per year. You can often have the option to increase this limit, but this will usually push up your monthly payments, too.
You’re free to speak to the team at David Hayton to discuss the right mileage limit for you and your circumstances.
What about HP?
HP - or Hire Purchase - is a form of finance which is ideal for people who want to own their car. With this method, you’ll make an initial deposit, but larger monthly payments than you would with PCP. You’ll still have a set agreement term, too, but you’ll be paying off the total cost of the vehicle.
Once you reach the end of the agreement, you’ll then own the vehicle outright. From there, you’re free to keep it - and not have to make any more payments - or you can sell it or trade it in against another vehicle. However, you won’t be the owner of the vehicle until you make that final payment, so you won’t be able to sell or upgrade the car in any way until that point.
Does HP have a mileage limit?
No, unlike PCP - and because you’re effectively paying off the total value of the car, there’s no mileage limit on a car finance through HP. It makes it a good option for higher-mileage drivers who would otherwise come close or exceed a traditional mileage limit on a car paid for via PCP.
The good news about both of these options is that you’re able to access both of them via a variety of cars here at David Hayton. Check out our current range of pre-owned vehicles today and get in touch with a member of the team to see what type of finance could work best for you.