Post on 31/08/2021
One of the most important steps in the process deciding upon the type of loan agreement you wish to enter. There are many different types and car finance options to choose from. Your search could lead you to different brokers and services such as CarFinance 247 or Zuto to name just two, or to an established direct lenders like Marsh Finance. With a vast array of car finance options to the customer, it is important to understand what type of loan agreement suits your needs. Deciding upon this can be difficult and so this blog has been created to assist you in the process. You can find more informative blogs regarding car finance on our website. There are three main types of car finance, personal contract purchase (PCP), hire purchase (HP) and personal contract hire (PCH). Marsh Finance Ltd are a car finance company who specialise in both PCP and HP deals. Each form of loan agreement including PCH have been explained below.
This method of financing does not allow you the customer to own the car, leasing it at a cheaper rate due to the purchase option removed. Both PCP and HP, which we at Marsh Finance offer, have purchase options available and as such are more expensive. As part of a PCH agreement, the customer pays an initial deposit followed by monthly installments. This type of agreement is suited to those who do not want to purchase a car or simply can not due to budgetary issues.
PCP agreements estimate the value of the car at the end of the contract. Marsh Finance Ltd sets a minimum figure which we guarantee the car will be worth called the ‘guaranteed future value’ (GFV). The GFV, and any initial deposit are deducted from the price of the vehicle and the customer’s monthly payments are calculated on the balance, plus interest on the balance and interest only on the GFV. Legal ownership is retained by the finance company until the end of the contract when customers can either purchase the vehicle for the price agreed at the start of the contract or return it to the finance company. PCP is better suited if you are looking to pay a lower monthly fee, as you pay the depreciation value of the car opposed to its current worth.
Hire Purchase, or HP, is one of the most popular ways to finance a car. The customer makes regular monthly payments over an agreed term normally between 12 – 60 months. If the terms are met and payments are made ownership of the car passes to the customer. Customers without the funds to purchase a car outright will find this type of loan agreement suited to them with ownership passing at the end of the loan agreement. If monthly payments are not made however, Marsh Finance have the right to take back ownership of the car. If you are in a position where you are likely to drive a high mileage each year, HP is best suited as you will own the vehicle at the end of the agreement.
Here at Marsh Finance, we have a team ready to help you tailor your finance needs. Contact us to start your car finance journey today.