Paying for your new car . . .
There are a wide range of options how you can pay for your next car, below is a summary of the main ones:
- Pay direct from savings - (if you are lucky & sensible enough to have enough) although you may then miss out on some good interest you could be earning from it being in an ISA.
- Personal Loan - from your bank, the security being held against you rather than the car
- Hire Purchase - Traditional car finance where you put down a deposit (or part exchange), you know how much interest you are paying from the start and this is paid within your payments over 2,3,4 or 5 years (or any term in between) at the end you pay a small option to purchase fee and own the vehicle.
- PCP (Personal Contract Plan) - As most people do not keep their cars for 5 year, due to change in circumstances, they start a family, children leave home, need a more economical car, want a higher performance car, whatever the reason people generally like to change their car as often as possible. Please take a look at this quick video from MotoNovo one of our finance partners which explains a bit further:
PCP Finance from Motonovo Finance on Vimeo.
With a PCP you put an initial deposit down, then the finance company work out the cars value, called the guaranteed minimum future value, at the end of 3 or 4 years (whatever term you want to take it over). Based on the mileage at the start, how many miles you estimate you will do each year.
Your payments would be based on the difference between how much you borrow and what the guaranteed future value would be.
For example a fictional car which is £10,000, you pay £500 deposit leaving £9500 to finance, based on 8,000 miles per year the finance company say that the car will be worth £3500 in 4 years time. So your payments are based on the £6000 difference. Rather than the £9500 if it were on straight forward Hire Purchase. (these are fictional figures and for illustration purposes) each car has a different guaranteed minimum future value which has a bearing on the monthly payments.
PCP's therefore GENERALLY give you: a) a cheaper payment compared to hire purchase, b) a newer / more expensive car for the same monthly payment.
Your payments would be based on the difference between how much you borrow and what the guaranteed future value would be.
For example a fictional car which is £10,000, you pay £500 deposit leaving £9500 to finance, based on 8,000 miles per year the finance company say that the car will be worth £3500 in 4 years time. So your payments are based on the £6000 difference. Rather than the £9500 if it were on straight forward Hire Purchase. (these are fictional figures and for illustration purposes) each car has a different guaranteed minimum future value which has a bearing on the monthly payments.
PCP's therefore GENERALLY give you: a) a cheaper payment compared to hire purchase, b) a newer / more expensive car for the same monthly payment.
We are here to help talk you through the different options, before you decide on any one for certain, give us a call to discuss.
Red and Co are finance specialists, dealing with a large panel of finance houses and are able to cater a monthly payment plan whatever your credit history may be