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Finance Your Car
Financing your purchase

Way’s to Finance your Purchase

There are many options when it comes to financing your next car but there also appears to be quite a lot of confusion about in the press and among consumers about car finance…

This article will explain the main differences between the three most popular and gets to the bottom of the argument once and for all…which product is best?


Hire Purchase (HP)

First off we have Hire Purchase (HP) – a finance product that has been around, it seems, since the dawn of time. It’s used everywhere in nearly all retail environments and is very simple to understand.

You pay a deposit and make your monthly payment until the car becomes yours, 100%. It’s best for customers who definitely want to own the car at the end of the agreement.

Advantages of HP

  • The cost of vehicle purchase is spread over a fixed period, normally between 1 and 5 years, rather than a large upfront payment
  • You own the vehicle once the final installment has been made

Disadvantages of HP

  • Potentially higher monthly payments in comparison to other finance options.

Personal Contract Purchase (PCP)

Next, there’s PCP. The press like to make out that this is the new kid on the block but in reality, it’s been around since Ford launched it’s ‘options’ programme in the early 90s. Many love to refer to this as a lease but it’s not, it’s designed as a route to ownership and provides flexibility for people who are unsure whether they want to own the vehicle or not at the end of the agreement.

With PCP you pay a deposit, make your monthly payments and at the end of the contracted monthly payments you have three options

  • 01. Make the final payment (normally referred to as the balloon) and own the car outright.
  • 02. Use any equity toward the deposit on your next car. The equity will be the difference between the actual value of the car and the Guaranteed Minimum Future Value (GMFV). The GMFV is set at the start of the contract.
  • 03. Hand the car back and walk away.

Advantages of PCP

  • Flexibility of car ownership at the end of the agreement.
  • Potential of the car being in equity at the end of the contract, which allows you to sell the vehicle, settle the finance and keep the difference.

Disadvantages of PCP

  • The balloon payment can be substantial making it not viable, for you, to pay in a single payment.

Personal Contract Hire (PCH)

Last, but by no means least, PCH. Personal contract hire applies exclusively to private individuals. When most people refer to the term ‘car-leasing’ they are actually talking about personal contract hire, in essence, it’s a long term rental.

With a PCH agreement, you take control of a car for a fixed period. Though the car is in your possession, it is not actually yours to own. Instead, you make fixed monthly payments to a leasing company for the duration of the contract. When the contract expires you simply return the car to the leasing company and, if you want to, take out a new lease. As a result, you never have to worry about resale values of the car. You never own it, so you can simply return it and walk away.

Advantages of PCH

  • It’s Cost effective. Monthly payments are generally lower than a PCP or HP agreement
  • There’s no depreciation concerns. You don’t own the car so you don’t have to worry about the resale value
  • Fixed monthly payments. There are no concerns around VED (road tax) or interest rate changes

Disadvantages of PCH

  • No ownership option – you can never own the car outright
  • If circumstance change and you have to change vehicle it can be costly to get yourself out the contract.

Which product is best?

So, that leads on to which is the best product? All finance products have their place.

If ownership is the number one priority and you don’t want to pay a lump sum at the end of the agreement then HP could be the product for you.

Unsure if you want to own and want the flexibility to decide later? Then take out a PCP agreement

Want to drive a shiny new car every two or three years without the worry of depreciation? Then PCH is the way forward

This article is not designed to sway you one way or another. It’s here to, hopefully, provide a little more clarity on some of the options available to you. There are other finance options available to consumers of new and used vehicles (and you can always pay cash) but the important thing is that you, as a consumer, are aware of all costs, interest rates and options available to you before entering into any form of financial arrangement.

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Having now found your perfect car the next stage is how you pay for it.

Firstly we always require a deposit of £250 for any car which we have in stock, this non–refundable deposit takes it off sale and ensures no one else can purchase this vehicle before you organise full payment & collection. If we ordering a vehicle on your behalf then we may ask for a larger deposit.

Due to recent changes in fees being charged by all the banks, we are unable to absorb these charges on vehicle payments, therefore

We only accept the following payment methods:

Type Method Information
Deposit Credit or Debit card Debit preferred
Full Balance Bank transfer To be made before collection
Cheque / Bankers draft Allowing 7 working days to clear before collection.
Cash Only up to £2000
Finance Company Cleared Funds from Finance Company are required before release of the vehicle.

We can help organise financing of your purchase through our trusted finance partners – Northridge Finance or Mann Island Finance.

We have chosen to work hand in hand with Northridge Finance and Mann Island Finance to provide you with the largest choice and flexibility of finance options available in today’s complex finance market. Our ever-increasing finance volume has allowed us to negotiate a package which means we can offer you some of the best rates on the market at the same time as offering a quick, easy and hassle-free car buying experience.

Northridge Finance logo
Mann Island Finance logo

Our finance packages

With so much choice in the finance market, we like to make it easy for you to make a decision by presenting a tailor-made Finance Package that suits you.

Our finance packages include but are not restricted to, the following:

  • Hire Purchase 12 months – 60 months.
  • Personal Loans / Fixed Sum Loan Agreements up to 48 months.
  • Personal Contract Plans (PCP) up to 48 months.
  • Leasing & Contract Hire /PCH

As always, finance is subject to terms and conditions and subject to acceptance* of your finance proposal. Please get in contact with our experienced Sales Team to discuss your request.

* Where there is a decline of your finance proposal we will (with your permission) send your proposal to our finance brokers Mann Island Finance where they will attempt to match your finance requirements with a suitable lender.

Jim Reid Vehicle Sales Ltd is authorised and regulated by the Financial Conduct Authority for consumer credit activities. (Our FCA Ref number 669024)”

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Videos

To help you decide what finance is best for you why not click on the short explanatory video clips below.


Why Finance Through a Dealership

What is Hire Purchase?

What is Personal Contract Purchase

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