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Isuzu Car Finance
Here at Bellinger Isuzu, we offer two types of car financing: Personal Contract Purchase and Hire Purchase, each of which comes with its own particular merits.
What is Personal Contract Purchase (PCP)?
PCP is the most popular car financing solution because it’s the most flexible. It can be used to achieve outright ownership or as a way of renting a car for the length of the agreed term.
This flexibility stems from PCP’s final ‘balloon’ instalment option which, once paid, ensures the vehicle is yours to keep. However, if you decide not to make the final payment, you can hand the vehicle back and walk away with no more money owed.
PCP also offers a third option: before the final instalment is due to be paid, you can choose instead to begin a new PCP plan. While doing so, you can upgrade to a newer Isuzu model.
How does PCP actually work?
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The most popular financing option, Personal Contract Purchase typically delivers lower monthly payments than HP. This is because the largest proportion of the overall payment (often referred to as a balloon payment) is left towards the end of the agreement.
Monthly PCP payments take care of the vehicle’s depreciation, and the balloon payment is made if you wish to own the vehicle outright.
Before an agreement is drawn up, you will need to establish an annual mileage figure with one of our finance experts. (Please note, there may be excess mileage charges if you exceed the agreed limit.) With this information, we can determine the guaranteed minimum future value (GMFV) of the vehicle while establishing a deposit amount and monthly payments that work for you.
Once the agreement has ended, you have three choices. You can:
- Keep the car by making the final balloon/GMFV payment
- Trade the car in for another one (it’s a good way of enjoying the benefits of a new model)
- Return the vehicle to us and walk away (this is one of the advantages of PCP – it allows you to effectively hire the car with relatively low monthly payments)
What are the advantages of PCP?
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- Monthly payments on a vehicle financed by PCP are usually lower than if your vehicle is financed by a Hire Purchase agreement.
- If you decide not to buy the vehicle, you can simply walk away when you've made all the payments.
- Similar to PCH, you can drive away a new or used vehicle every few years (dependent on the chosen term) without worrying about selling it on.
- If your vehicle is worth more than the Guaranteed Future Value then you can use that equity towards a deposit on a new vehicle.
What should you consider when option for a PCP?
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- If you want to buy the vehicle you will need to pay your final balloon payment (the Guaranteed Future Value).
- Similar to PCH, you will need to agree on a mileage allowance at the beginning of your contract and there may be excess mileage charges if you exceed this.
- You won’t be able to sell the vehicle without settling the finance.
- You won’t own the vehicle until you have made all of your repayments.
- You’ll need to keep the vehicle properly insured, maintained and in your possession until the full value is paid off.
Can I settle my PCP agreement early?
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Usually, the finance company will require that you pay off the difference between the total value of the vehicle and what is left to pay. Provided this difference doesn’t amount to negative equity, you should be able to settle early. Before you do so, you will need to ask the finance company for a settlement figure. If the vehicle is worth more than the GMFV, you will then be able to put the positive equity towards a new vehicle, if you wish.
Things to consider
- You won’t be able to sell the vehicle until all payments have been made.
- During the course of the agreement term, you will be responsible for insurance and maintenance of the vehicle.
What is Hire Purchase (HP)?
HP is an older car financing solution than PCP, and it remains much in demand to this day. It’s a good option if you fully intend to own a vehicle outright, and especially if you have a history of defaults, or county court judgements related to debt.
What are the advantages of HP?
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- You’ll be able to drive away a vehicle that you may not have managed to buy outright.
- Unlike a PCP or PCH contract, you won't need to estimate your mileage at the start of your Hire Purchase agreement, so you'll avoid excess mileage charges.
- Once you’ve made your final monthly payment, including the option to purchase fee, you'll have full ownership of the vehicle.
What should you consider when opting for HP?
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- Monthly payments may be higher than some other finance options, such as PCP, as you're paying off the full value of the vehicle.
- You won’t be able to sell the vehicle without settling the finance.
- You won’t own the vehicle until you have made all of your repayments.
- You’ll need to keep the vehicle properly insured, maintained and in your possession until the full value is paid off.
Can I settle my HP agreement early?
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Essentially, yes. You can do so by paying a settlement fee, which covers the cost of any remaining instalments (including interest). Once you’ve paid this fee, the vehicle is yours, albeit sooner than was originally agreed.
Please note, an HP agreement can be terminated early as long as you’ve paid back a minimum 50 percent of the total finance amount (including interest).
Things to consider
- Since you’re paying off the full value of the vehicle, monthly payments may be higher than are available with other finance options, such as PCP.
- During the full term of the HP agreement, you will be responsible for all vehicular insurance and maintenance.
- Until you’ve paid in full, you will be unable to sell the vehicle.
PCP vs HP – which is better?
There are pros and cons to both financing solutions. Each requires a deposit, followed by fixed monthly payments – however, the latter tends to be more affordable with PCP. This is because a PCP final ‘balloon’ payment (also known as Guaranteed Future Value (GMFV) or optional final payment) can be quite high, particularly if you choose low monthly payments.
With PCP, once the deposit is factored in, the monthly instalments pay off the car’s expected depreciation, which is why the final GMFV payment tends to be much larger.
If you require greater flexibility, PCP is the arguably the best option. However, if you wish to make the exact same monthly payments (includingthe final payment), HP could well be the better solution, particularly if you’re working towards full ownership.
