Making the decision to buy a new or used car is generally not one that can be taken lightly. However, thanks to the availability of Personal Contract Purchase and Hire Purchase finance solutions, ownership is more viable than you might think.
Here at Bellinger Subaru, we provide both options. Let’s take a look at the benefits offered by each…
What is Personal Contract Purchase (PCP)?
It’s estimated that four in five new cars on UK roads are financed by PCP.
As with Hire Purchase (HP) financing, PCP requires a deposit, followed by fixed monthly payments. However, unlike HP, these monthly instalments pay off the vehicle’s anticipated depreciation. It’s the larger final ‘balloon’ payment that secures the car.
Alternatively, if you choose not to pay the final instalment, you can hand the vehicle back and walk away with no more money to pay. Essentially, you will have leased the car.
Or, you can choose to begin a new PCP plan – and select a brand-new Subaru.
When you have chosen your vehicle, you will then agree your annual mileage and decide on the agreement term with one of our Retail Managers.
We will then determine the Guaranteed Minimum Future Value (GMFV) of the vehicle at the end of the agreement and work out a deposit and monthly amount that works for you.
At the end of your agreement you will then have three options:
Return – Simply return the vehicle the back to the finance company
Retain – Keep the car by paying the optional final payment
Renew – Trade it in for another car
For a quotation, help, or advice contact us and ask to speak to one of our Retail Managers.
You can normally settle your agreement early by asking the finance company to provide you with a settlement figure. However, the finance company will require you to pay off the difference between what your vehicle is worth and what you still owe. There may be a difference which is known as negative equity. On the other hand, you may find that at the end of your term your vehicle is worth more than the Guaranteed Future Value, which means you will have some positive equity to contribute towards your next vehicle.
What is Hire Purchase (HP)?
HP is often the finance solution of choice for those motorists who are intent on full ownership from the start. While requiring a deposit and fixed monthly payments (as with PCP), the latter tends to be lower with HP because monthly instalments incrementally pay off the value of the car. Also, unlike PCP, there’s no large final instalment, simply a final payment which is the same value as all previous monthly payments.
The short answer is yes, you can end your finance early. There are different provisions within each finance agreement that allow you to do just that. If you have paid two-thirds or more of your finance agreement, the options to end the finance agreement early open up.
For a Hire Purchase agreement, there is an option of paying it off early through a settlement fee. A settlement fee covers the cost of any remaining unpaid instalments and interest payments remaining on the agreement. Once the settlement fee is paid, you take full ownership of the vehicle early.
Under a Personal Contract Purchase agreement, you can also pay a settlement fee for bringing the agreement to an end early. After that, you can choose to hand the vehicle back or you have a second option. Through a PCP agreement, you can take full ownership of the vehicle by paying off the remaining Guaranteed Minimum Future Value also known as a balloon payment.