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New Car Finance Guide
There are several things to bear in mind when looking at Finance options: When comparing different deals available it's important to compare on a like for like basis, and don't just look at the monthly repayments. It's best to work out the total amount payable including the deposit, monthly repayments and not forgetting to add in any extra fees. There are different methods of funding available, from bank loans to contract hire agreements, below we have listed a few along with the pro's and cons of each. Hire Purchase (HP) With HP you normally pay a deposit usually equivalent to 10% of the purchase price of the car and then repay monthly repayments to the finance Company over an agreed term. Once all the repayments have been made the car is yours. Pro's You have all the equity in the car at the end of the agreement Equal monthly repayments for the contract term Against Higher repayments than on other schemes Personal Contract Purchase (PCP) These schemes are normally run by the Manufacturer, but increasingly Finace houses are competing for this business. you may be familiar with some of these well known Manufacture backed schemes Ford options, Nissan Select Citroen Elect 3 Etc With PCP you have to tell the Company how long you would like to keep the car and how much mileage you intend to cover over the term. You then pay a deposit and monthly repayments for the term of the contract. At the end of the contract there is a final (balloon) payment to make, you then have the following options 1 Pay the final payment and keep the car 2 Part exchange the car and out of the value of the car the final payment is made and any extra equity is then put down as a deposit for your new car 3 Hand the car back to the Finance Company and pay nothing. Pro's Lower monthly repayments than HP mean you can afford a better car for the same monthly repayment. Ability change the car more frequently Against There are penalty fees payable if you exceed the agreed mileage, and the car is damaged in any way when returned to the Finance Company. Personal Contract Hire. With PCH you are in essence long term hiring the car, you have to tell the Finance Company how long you would like to keep the car (typically the longer you keep the car the cheaper per month it will be) This method of Finance is popular with Companies due to tax benefits and the low monthly repayments it brings, but increasingly we are seeing private customers taking advantage of the scheme. Pro's 1 Low monthly repayments 2 Road tax and road side assistance is normally included for the full contract term 3 No disposal / Part exchange worries, just hand the car back and choose another. Against 1 There are penalty fees payable if you exceed the agreed mileage, and the car is damaged in any way when returned to the Finance Company. 2 No equity in the car 3 There are penalties if you want to settle the agreement early. Cheap Cars Online - Your Online Friend For New Car Buying! Disclaimer: All information on this site is provided in good faith for guidance only and is subject to human error. We cannot be held responsible for any loss or damage caused through following any of our advice or suggestions. Please ensure you are completely happy with any new car deal you undertake before going ahead and check with your local Trading Standards or the Office Of Fair Trading if you have any doubts. Check the individual car manufacturers website for the latest info on any particular car before buying. Copyright ©2008 all rights reserved |
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