The car finance industry has been booming over the past few years, with 4 out of 5 cars in the UK bought on credit or finance! If you’re thinking about getting your next car on finance, you’ve come to the right place. UK Car Finance are here to help you decide which option is best for you! In this article, they explore what car finance is, the different types and how it could be the perfect choice for you!
What is car finance?
Car finance is an umbrella term for different ways to finance the cost of a car. With car finance, you can spread the overall cost of owning a car into affordable monthly payments. Usually within a car finance deal, you will sign an agreement which states you will make monthly repayments on a car of your choice to an agreed term and with an additional interest rate. It’s also worth noting that a car finance agreement is a legal document so you should be completely sure before you sign up to anything. But don’t worry, it’s not as daunting as it seems and there are a few different types of car finance agreement you can choose.
What are the types of car finance?
The three main types of car finance include a personal loan option, Hire Purchase (HP) agreement and Personal Contract Purchase (PCP) agreement. A personal loan is a great way to finance a car as you can use a personal loan on just about anything. This means you can use the loan to buy a car and you are the automatic owner of your new car from the start. You can usually spread the cost of a personal loan over one to seven years and pay back the loan in fixed repayments each month. Hire Purchase is another way you can fund your next car with fixed monthly payments to an agree term. There are also many no deposit car finance options available within a hire purchase agreement so you don’t have to use any savings! Different to a personal loan though, you aren’t the legal owner of the car until after you have made the final repayment. Personal Contract Purchase is similar to HP where you make fixed monthly payments to an agreed term, but instead you have 3 options at the end of your agreement. You can either return the car, pay the final balloon payment (also known as resale value) or use the resale value towards buying a new car. This is often a popular choice with people who like to change their car regularly.
What are the benefits?
As mentioned, more UK drivers are choosing to finance their next car but what makes it so popular? There are many benefits of getting your next car on finance.
- It’s affordable
This is probably the main reason people choose to finance their next car. Using an online car finance calculator which allows you to work out your affordably for car finance before you even apply!
- You usually get a newer car
Car finance agreements are usually based on financing newer cars as they are more reliable. This also gives you better peace of mind as you are investing in a quality car rather than an older model which is more likely to need repairs.
- Fixed interest rates
With most car finance agreements, your interest rates will be fixed, which means there are no hidden or unexpected charges or changes to your agreement throughout the duration.
- Hold onto your savings
Many people think car finance means hefty deposits and breaking into your savings. However, with many no deposit options now available you can keep your funds for a rainy day!