And if you are, good luck to you.
For the rest of us Well, it's essentially like having a company car, only the company is you. It's a way of buying a car that was first pioneered on this side of the Atlantic by Ford and has now reached a point of success that pretty much everyone is now offering PCP packages. It is effectively a lease - you never really own the car as such, but you pay a deposit usually but not always covered by your trade-in and then pay a monthly fee for usually 36 months before there's a final 'bubble' payment.
The clever thing about a PCP is that it allows car makers to take into account the likely depreciation of the vehicle and most companies guarantee the minimum value of the car at the end of the lease.
That value effectively covers the final bubble payment, meaning you can, if you like, hand back the car and the keys at the end of the term and walk away debt free. Or, more likely, you can use the value left in the car over and above that bubble payment figure to become the deposit on your next car and simply roll the plan over into your new vehicle.
The best way to shop around for a good deal is to use an online comparison site. Here are. Car hire purchase deals are where you hire the car with an option to purchase the vehicle at Not the car finance option you were looking for?.
It's a neat way to keep your costs down as far as possible and it's also a neat trick by the car makers to help encourage customer loyalty. The things to watch with a PCP are the terms and conditions. Make sure, as with any contract, that you read all the fine print very carefully - there may be stipulations as to maintenance and vehicle condition, or that final guaranteed value may become null and void. You may also be compelled to have the car serviced at a main agent, so watch for that too.
HP is still a good way to buy a car, even with the advent of the PCP, and it's an option that essentially gives you more freedom. Most car makers and dealers will have pre-agreed HP packages with major banks or in the case of Volkswagen, BMW, Renault and some others, their own internal finance companies so the deal can be just as easily done and signed on the day as a PCP.
The downside is that your monthly payments will be higher as you won't be able to leave a bubble payment dangling at the end, and it may mean that there is a requirement for a higher deposit, depending on the plan.
A good, old-fashioned bank loan or credit union loan is of course still a smart option and the major upside is that you will actually own the car from day one unless of course you've put the car up as collateral against the loan - loan packages have different requirements in this area. Rates are very competitive at the moment, but it's worth pointing out that many banks still have low acceptance rates in the wake of the financial crash.
In some cases, it's still easier to get finance from a dealer or car maker simply because they're more motivated to give it to you - banks can still be rather more gimlet-eyed when it comes to handing out money. A private loan like this is probably the best way to finance a second hand car as well, as you can potentially have the money in your hand ahead of time giving you greater bargaining power and you do not have to finance the initial hit of depreciation.
The conventional wisdom has it that buying a second hand car is the best way to get maximum value. The old rule of thumb was to buy at two years old and sell at five, thus escaping the worst of the depreciation curve.
That's not necessarily the case any more though. Buying a second hand car is still a sensible move of course, and the growth of long-term warranties on new cars some car makers offer as long as an eight-year warranty means that you can now often buy an older car that still has manufacturer backing.
Many, in fact most, car makers now offer approved second hand packages, which, for a slightly higher entry cost, give you a warranty as much as two years in some cases , a full mechanical check and service and roadside recovery packages if it all goes wrong. As an example, the dealership sends your credit request to several different lenders banks, credit unions, etc.
You may be able to negotiate the interest rate quoted to you by the dealer. Ask or negotiate for a loan with better terms. Be sure to compare the financing offered through the dealership with the rate and terms of any pre-approval you received from a bank, credit union, or other lender.
Choose the option that best fits your budget. Consider whether the cost of the loan outweighs the benefit of buying the vehicle. Even if you have poor or no credit, it may be worth it to see if there is a bank, credit union, or another dealer that is willing to make a loan to you.
All products are presented without warranty. Back to top. It often includes servicing agreements and sometimes even insurance and tax, which may allow you to just make a payment each month and get on with motoring. We work with a number of lenders to find you the best car finance deal, so try our car loan calculator to find your perfect car. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website.
Another feature of this type of dealership is that your monthly payment is made to the dealership rather than the bank or credit union. Some Buy Here Pay Here Dealerships, and some other lenders that lend to people with no credit or poor credit, put devices in their vehicles that help them repossess or disable the vehicle if you miss a payment. Buying a car is a big decision, especially when it comes to your money.
Be sure to examine the terms payment, length and interest rate of all offers. If you are wondering how a payment may fit in your budget, contact a credit counselor.
They can review your income and expenses with you and may be able to help you reduce debts in order to better afford a vehicle. Compiled in part with information from the Consumer Financial Protection Bureau.