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Car finance Explained

Don’t know your HP from your PCP? Or the difference between a personal loan and a guarantor loan? Well, you are not alone. With so many acronyms being flung around and many different types of car finance advertised, it can be confusing.

Here at Car Loanz our aim is to help you find the most appropriate car finance package for your own unique circumstances and we are happy to provide help and advice on any aspect of the finer detail that you may not understand.

In the meantime, however, here is our layman’s guide to car finance:

Firstly, car finance is a general term that is used when you buy a car and pay for it over a number of months or years. It is important to remember that the lender owns the vehicle until such time that you have cleared your finance agreement with them (ie. when you have made your final payment).

Hire Purchase (HP)

You pay a deposit (optional) and then pay off the balance in regular, monthly instalments.

Pros:

Cons:

Personal Contract Purchase (PCP)

This is where you pay a deposit, plus regular monthly payments for a set period of time, typically 36 or 48 months. At the end of the term you give the car back, or make a final, larger payment (often known as a ‘balloon’ payment or Guaranteed Minimum Future Value) to keep the vehicle.

Pros:

Cons:

Personal loan

This is where you take out a loan and use it for buying a car.

Pros:

Cons:

Guarantor loan

This is a loan where a third party (perhaps a parent or friend) agrees to guarantee the repayment of the finance if you fail to keep up with your monthly payments.

Pros:

Cons:

This is just a brief overview of the types of vehicle finance available and should help you feel a bit more informed about your options. No matter what type of finance you choose, remember that:

*Detailed information relating to the finance options is provided by the Lender and they will assess your suitability regarding the options available to you.


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