If you want to drive around in a new car, you don’t have to settle for buying one outright nowadays. You actually have several options if you would like a new car but aren’t too keen on spending all of your hard-earned savings. You could go for car financing, and there are different packages available, one of which could very well suit your needs and budget. So which car financing option is the best fit for your requirements? Let’s have a look at your different options with car financing if you want that new car.
- PCH or personal contract hire
PCH, or personal contract hire, is basically your standard car lease deal. With personal car lease deals, you are simply paying for the cost of the vehicle’s depreciation for the time that you are using it. You will settle an initial fee or amount, and this will then be followed by payments per month for a certain period, say, two or three years. With this, you can make use of a new car whilst it’s still fresh from the manufacturer, but you don’t have to worry about selling it or trading it in once your contract is finished. All you then have to do is give it back to the car leasing company.
One main benefit of this option is the fact that leasing providers can introduce you to a whole range of lenders who are quite competitive, bringing the rates down. With this kind of competition, you can more easily select the best package or deal for whatever car you want. Your rate will also be lower than other financing plans or methods, as other methods may only give you a rate that’s non-negotiable from a single financing company. Aside from this, with PCH or personal contract hire, you only have to pay for the car’s depreciation during your lease, and this is quite cost-effective in many ways. Your initial outlay of money is not that high, and your payments per month will also be lower compared to other options. You can also expect payments to remain the same through the entire lease period, and road tax is often included as well. And here’s another benefit: since the rates are lower, you could find that you are able to pay for a vehicle with better features and higher specs.
- PCP or personal contract purchase
Another option you have is PCP or personal contract purchase. Like PCH, you will pay a deposit initially and then settle payments per month until the end of the agreement. But at the end, you have three choices: you can either give the vehicle back, you can purchase the vehicle with a ‘balloon payment’ or you could use the car’s surplus value to purchase another vehicle. The main benefit of PCP is obvious: you can choose to purchase the vehicle in the end. But because of this, the extra cost will be reflected in your fees per month, and you will pay interest on the car’s entire value instead of just its depreciation, like with car leasing. Another main difference between PCH and PCP is the fact that PCP doesn’t give you the same competitive market rates as PCH since you will just be offered a set, single rate from one finance provider or lender. If you don’t feel a need to own a vehicle at the end of the agreement, you could well go for PCH rather than PCP.
- HP or hire purchase
HP or hire purchase is an option that lets you own the vehicle outright at the end of the agreement, with every monthly payment designed to reduce the car’s cost until you settle the entire cost of the car at the end. Of course, however, HP agreements can cost you more every month, as you are essentially paying for the vehicle’s full value. Keep in mind too that cars depreciate, so its value will be less at the end of the term than when you first had it. Also, if you want to end the contract early, you are required to settle the debt completely, even if the vehicle is not worth more than the amount against which it is secured.
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