How does car finance work?

Together with our finance partners we have put together a short film which easily explains how Car Finance works. From Hire Purchase to Personal Contract Purchase (PCP). This video will give you the confidence and understanding next time you are purchasing a vehicle.

Financing through a dealer can be convenient quick and easy you can shop for a vehicle and finance right from the dealer’s website where they have detailed information about the finance they offer as well as finance calculators to find the perfect agreement for your budget you can leave the hassle and paperwork to the dealer and your finance agreements can even

Be approved on the same day you inquired you can also take advantage of multiple finance products like higher purchase which gives you a fixed interest rate or lease purchase and personal contract plan which may allow you to lower your monthly payments or shorten the length of your finance agreement by deferring part of the repayment to the end of the agreement

This will give you the opportunity to change your car more frequently financing your car is important your dealership can help you get it right hire-purchase is a finance product that allows you to budgets accurately by giving you a fixed interest rate and fixed monthly payments the deposit and the length of the contract in the higher purchase agreements can

Be easily adjusted letting you find the monthly payment that fits your budget because the vehicle acts as the security for the finance arrangement other forms of credit will remain available to you for future use a higher purchase facility can be settled at any time at the end of the agreement you will take full ownership of the vehicle pcp stands for personal

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Contract purchase a personal contract purchase is a finance product designed to reduce your monthly payments by delaying part of the repayment to the end of the agreement the monthly payments deposit annual mileage and final payment can all be adjusted to your needs and the agreement can be settled at any time the final payment can be referred to as a guaranteed

Minimum future value a residual value or sometimes a balloon this figure is calculated using industry data on the likely value of your vehicle at the end of the finance agreement the final payment amount is often adjusted downwards to aim to provide equity at the end of the agreement for your next purchase in a feature unique to pcp agreements the final payment

Is guaranteed by the finance company meaning that if the real-world value of your vehicle declines faster than anticipated you can simply return it to the finance company you will also have the option of paying off the future value to keep the vehicle or return the vehicle as a part exchange because repayments on a pcp are typically lower than personal loans or

Higher purchase agreements you can reduce the term of the agreement or even consider a higher specification of vehicle for a similar monthly payment you

Transcribed from video
How does car finance work? By Aitken-Walker Cars