Car Finance Advice

Your finance options - what are the different methods available?

For many, purchasing a car with a single payment can be very difficult. For this reason there are a number of different finance options available for people that cannot afford an outright purchase. These car finance options can drastically vary in terms of payment scheduling and interest rates, depending on your selected method and your personal circumstances.

Conventional car loan

The most common way to acquire car finance is by organising a loan from either a bank or specialist finance company. The duration of the payment period for a loan can vary, depending on the source of the money and the agreed timeframe. Typical payment periods from a finance company are between two and five years, however, banks can provide personal loans that can be paid off over a longer period of time. Most automotive loans will have a fixed interest rate.

There are two types of loan available, either secured or unsecured. With a secured loan, the finance company or bank will retain ownership of the car until the balance of the loan has been paid off. An unsecured loan means that the buyer is attached to the loan and not the car, meaning that ownership of the vehicle is retained from the beginning. Most unsecured loans are more expensive and will have a higher interest rate than a secured loan.

Personal contract hire (PCH)

Personal contract hire means that you rent the vehicle for an agreed period of time. Monthly payments are made for the duration of the rental period and at the end of the lease the car will usually be taken back by the finance company and sold as a used car. In some cases, the finance company may agree to sell the car to the buyer for a final lump payment.

Personal contract purchase (PCP)

Personal contract purchase is very similar to personal contract hire; however, the buyer retains the right to be able to purchase ownership of the car once the lease period has ended. This price will be agreed on before the car is initially obtained.

Hire purchase (HP)

Hire purchase is a favourite among business owners, as it allows more flexibility with payments. Deals can be arranged so that monthly payments are in accordance to the company's budget and cash flow. A balloon payment will then be required upon completion of the hire purchase period. This payment requires the buyer to pay off the remainder of the balance. The buyer can also reduce the final balloon payment by increasing the monthly repayments throughout the payment period. The car only becomes the property of the buyer once the final balance has been paid off.

Lookers Car Finance on New Cars

At Lookers, as authorised retailers, we have a range of finance offers available across a wide selection of new cars from numerous brands. See our current list of new car offers available from our network of dealerships.