Buying a new car can be a huge investment that’s sure to test the wallets of even the most frugal families – but new research indicates that more people are purchasing cars in the UK than has been seen in years thanks to previously unpopular methods of borrowing.
A recent report by the Finance and Leasing Association
(FLA) has indicated a very strong growth in the number of used cars bought on finance at dealerships up and down the country. While the UK economy struggles to recover from several sharp hits over the past decade, it’s possible that more people are increasingly able to afford to purchase a car on finance than they have been in years.
Some of this could be due to the new flexible payment options provided by car finance lenders such as the PCP, or Personal Contract Purchase. Rather than the more traditional Hire Purchase which can also be offered, the PCP offers more flexibility to the borrower as the monthly repayments can be lower, and for a longer period, than the Hire Purchase. Hire Purchase is paid with a mind to finally owning the car at the end of repayments, subject to higher sums being paid at the start and end of the contract, but the price of the Personal Contract Purchase offers three options at the end of the term:
a) Guaranteed Future Value payment – one more price to pay to take full ownership of the car, of an amount which is agreed on at the start of the contract to avoid negative equity and/or depreciation
b) Walk away – simply pay the final loan payment as normal and then you are free to give up the car, subject to excess mileage and other conditions
c) Part-exchange – Use whatever amount you have as credit on a deposit for a different car and make another PCP.
Depending on the APR you pay, any one of these options will suit a lower budget for a new car nicely – which is why you should be sure to shop around to get the ideal APR for your needs. The APR you‘ll pay is based on your deposit amount, the duration of the loan and, in some cases, your credit rating. Check out carshop.co.uk/car-finance
to get more information and to try out the Car Finance Calculator.