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Finance Options for Vehicles

At Fleetprices - we love leasing, its what we do; but today I am looking to take away some of the mystery associated with the other different types of finance available for vehicles, mainly Personal Contract Purchase (PCP) and Hire Purchase (HP).

These two types of finance have some similarities, they are both loans and have an APR associated with them. The full balance of each will go to form part of your credit rating. Both of these payment options offer an early termination, this is usually available from the 50% plus repayment point. Neither of these options include road tax. But generally, that is where their similarities end.

The HP option is fairly straight forward. You pay your deposit if one is required, and then you pay your fixed monthly repayment amount until the end of your term. On completion of the final payment, you own the vehicle. A regular loan may work our slightly cheaper in the long run, however, due to the Hire Purchase being secured on the vehicle, the risks are often not worth the slight financial savings.

If you decide to take out PCP, the monthly rental will be based on the initial cost of the vehicle and the value of the vehicle after your term has completed. The difference in these values is what you will be repaying in a set monthly instalment and will be set by the finance company. The value of the vehicle after your term completes depends on a variety of things such as the condition and the mileage of the vehicle. If you don’t get your estimated mileage right at the beginning of your term, you could find that you are overpaying or underpaying.

You need to work out, how much your complete payment will be to work out the best deal for you. Add up any deposit, plus your monthly payments and compare these to other options such as contract hire, you may find there are much better deals out there for you.

At the end of your term you have three options:

You can return the vehicle at no expense subject to wear and tear and mileage allowance
You can pay the outstanding balance and keep the vehicle
You can part exchange and use the equity in your vehicle, if there is any, for your next vehicle.

Often part exchanges are made to look attractive whether there is equity or not. Take a look at this investigation: Secrets of Your New Car (2017) - Channel 4 Dispatches the end of the day, you need to work out which option best suits your lifestyle.

If you are considering either of the above options, we would also recommend that you speak to us about leasing, as often this is the most cost effective way of getting a new vehicle. Speak to one of our team on 0800 097 0897 or email them at

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Posted on 15th March 2019 at 9:30 AM

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