Car Finance Deals in the UK – recent years have seen an increasing percentage of new cars purchased through finance agreements. Manufacturers may offer attractive 0% financing offers on car finance deals, however, consumers should read all applicable T&Cs carefully prior to making their decision.
Many lenders impose minimum credit score requirements and use an automated application vetting process, but there are lenders who take a more tailored approach to approval processes.
Personal contract purchase (PCP)
PCP finance has become increasingly popular for new car buyers in the UK. It enables you to afford more luxurious vehicles thanks to smaller monthly payments and an optional final payment plan. You may also find low-rate PCP deals for nearly-new and used cars from manufacturers – though these could increase your monthly payments or stretch out the contract length further than intended.
To qualify for a PCP deal, it’s necessary to pass a creditworthiness assessment. This involves calculating your affordability by reviewing your past and current debt; so the finance company can ascertain if you will be able to meet monthly payments as promised.
When selecting the length of a PCP agreement it is vitally important that it does not become too long as this could make payments too expensive and put at risk your ability to meet them on schedule.
Hire purchase (HP)
HP car finance is one of the most common methods of financing new and used vehicles, splitting its cost minus any deposit into fixed monthly repayments over an agreed contract term. Once complete, you own the car outright, however it is essential to consider all costs before choosing this option; low monthly payments may seem more enticing but could come with higher interest rates than expected.
HP finance may be an ideal solution for buyers who prefer not paying in one lump sum and want the flexibility of selling or trading in their car at the end of the contract. Furthermore, monthly repayments tend to be lower with this method compared with PCP finance.
Cancelling an HP finance deal is possible, though any voluntary termination could damage your credit report and prevent you from qualifying for future finance deals in the future.
Car leasing can be an affordable alternative to outright or dealer finance car purchases. Through a lease agreement, you rent the car for a set period of time with fixed monthly payments; at its conclusion you return it back to the dealership or factory where it originated from. Keep an eye out for any extra mileage or damage charges in your lease agreement terms before signing.
Leasing is an increasingly popular alternative to purchasing cars, enabling drivers to drive the latest models for fixed low monthly payments. There are various UK leasing companies such as Auto Trader and Leaseplan offering competitive deals. Car Leasing Compare provides another resource where you can search manufacturers to find deals.
Personal Contract Hire (PCH) leasing allows you to drive a new car for a set period, with fixed monthly payments and no concerns over resale value. At the start of a lease agreement, a deposit or advance rental payment must be paid, an annual mileage allowance selected and lease term determined; at its conclusion you return it back to the finance company.
Leasing can be more accessible than other forms of financing, however you will require a strong credit score in order to secure the best offer. Remember that your leasing credit check won’t take into account additional outgoings such as insurance costs so be sure that monthly payments fit within your budget before applying.