Is car finance better than loan? - All you need to know

If you can’t afford to buy a car outright but need to buy a car, getting a car finance Manchester agreement or a loan are your options. Neither are better than each other, it depends on your needs and finances. In this guide, we will help you decide whether a finance agreement or a loan will be the best route for you to take.

What is car finance?

Car finance refers to the various financial products which allow someone to acquire a car, including personal contract purchase (PCP) and car hire purchase (HP). They are usually offered at dealerships when you are buying a new or used vehicle.

PCP Car Finance:

When buying a car using PCP, you usually pay a deposit (around 10%), a monthly payment with interest added (for around 24 or 36 months), and an optional “balloon payment” at the end. You have the option to either choose to pay it and keep the car, trade it in for a replacement and start a new PCP contract, or give it back, and there won’t be anything to pay.

HP Car Finance

Hire Purchase or HP car finance agreements Manchester work by providing a loan that equals the total value of your new or used car, minus the amount of your initial deposit. You pay a deposit (of around 10%), then the rest of the value will be paid off in installments in one to five years.

What is a car loan?

Alternatively, you can take out a personal loan to buy a vehicle outright from a dealership or private sale. You do not need a deposit or balloon payment. You will pay a monthly amount over a number of years. Unlike car finance, the vehicle will be yours from the beginning.

What is best for me? A loan or car finance?

The cheapest option:

Which option is the cheapest will depend on your credit rating. If you’ve got a good credit rating, a personal loan is likely going to offer the lowest interest rate. However, if your credit score is poor, car finance will probably offer you a better rate.

Your monthly budget:

While a bank loan or hire purchase may offer the lowest overall costs, personal contract plans will usually give lower monthly payments. If you have a low monthly budget after all your other payments have gone out, PCP car finance agreements Manchester will be the best option for you.

Choice of car:

A bank loan will give you better car choices than car finance because you’ll have to buy from a dealership.

Car ownership:

If you want to own the car straight away, you should choose a bank loan instead of car finance.

Maintenance of the vehicle:

When buying a car with car finance, there is usually a maintenance standard required by the lender. If you decide not to pay the balloon payment and return the car, you may be charged for wear and tear.

Mileage restrictions:

With some car finance deals, there are mileage restrictions. If you don’t want this, you should go for a bank loan.

Car finance claims for motor finance mis selling - PCP Claimsline

If you think you’ve been mis sold PCP car finance or HP car finance, contact us and start your claim today.