PCP (Personal Contract Purcase)

Personal Contract Purchase (PCP) is an increasingly popular choice for car finance. It offers the best in flexibility at the end of the agreement, together with low, fixed monthly payments.

PCP is perfect if you are opting out of your company car scheme. Your company car allowance can fund your monthly payments, but there is no company car tax to pay.

At the beginning of the agreement your car's guaranteed future value is calculated, based on an agreed mileage and age. This is deferred as a final 'balloon' payment.

With PCP you don't have to commit to buying the car at the outset. You use it for an agreed period of time (24-48 months) and then decide at the end of this period what you would like to do. You have four options:

1. Buy the car by paying an agreed minimum residual value
2. Part-exchange the vehicle for another
3. Sell the vehicle privately (settling the balloon)
4. Or, subject to mileage and condition, return the car with nothing more to pay (e.g. if depreciation resulted in negative equity)

The benefits of Personal Contract Purchase:

• Low risk - A minimum future value is guaranteed
• Low deposit - keeps valuable personal or business cash available
• Low fixed monthly payments - perfect for budgeting
• Choice - Buy the car, part-exchange it or just return it
• A better car - lower payments can help you choose a higher specification car
• Tax advantage - the cash alternative when you opt out of a company car scheme is not subject to company car tax
• VAT free - no VAT on your payments

Hire Purchase

Hire purchase offers a straightforward way to spread the cost of your new car. With this method of finance you have a fixed rate of interest with fixed monthly payments, making budgeting simple and easy.

You choose the amount of deposit you wish to pay, typically between 10-50% of the car's cost. The remainder of the balance, together with fixed interest, is repaid over an agreed period of your choosing (12-60 months).

The benefits of Hire Purchase:

• Low deposit - keeps valuable personal or business cash available
• Control - you decide the deposit, you decide the term
• Fixed monthly payment – makes budgeting simple
• Flexibility - doesn't compromise your other lines of credit
• Assets - you gain ownership of the car
• Tax benefits - Tax allowances for business users
• VAT free - no VAT on payments

Hire Purchase with a Balloon

Hire purchase with a balloon offers greater flexibility than normal hire purchase. You pay lower monthly fixed payments and at the end of the agreement, you can make a final lump sum payment (or 'balloon') to own your car. This payment is calculated on the estimated future resale value of the car.

You gain the benefits of fixed rate finance, but with the added advantage of a lower fixed monthly outlay because you defer repayment of some of the borrowing. At the end of the agreement your options include car purchase, refinance, part exchange or resale.

In a typical agreement, you choose the amount of deposit to pay, usually 10-50% of the car's cost. The difference between this and the agreed balloon, plus the fixed interest, is repaid over a fixed term (12-60 months). At the end of the term you can make the final balloon payment, and own the car.

The benefits of Hire Purchase with a Balloon:

• Low deposit - keeps valuable personal or business cash available
• Lower fixed monthly payments - perfect for budgeting
• A better car - lower payments can help you choose a higher specification car
• Flexibility - doesn't compromise your other lines of credit
• Assets - you gain ownership of the car
• Tax benefits - Tax allowances for business users
• VAT free - no VAT on payments

Hire Purchase with a Balloon - Lease Purchase

Hire purchase with a balloon offers lower monthly payments than normal hire purchase. Instead, at the end of the agreement, you can make a final lump sum payment (or 'balloon') to own your car.

It's fixed rate finance - but with a lower fixed monthly outlay since you defer repayment of some of the borrowing. At the end of the agreement options include car purchase, refinance, part exchange or resale.

The deposit you pay is flexible - typically between 10-50% of the vehicle cost. The deferred balloon element is calculated on the estimated future resale value of the car.

The difference, plus fixed interest, is repaid in equal instalments over an agreed period (12-60 months), plus a final balloon payment.

Why consider Hire Purchase with balloon?

• Low deposit - keeps valuable personal or business cash available
• Lower fixed monthly payments - perfect for budgeting
• A better car - lower payments can help you choose a higher specification car
• Flexibility - does not compromise your other lines of credit
• Assets - you gain vehicle ownership
• Tax benefits - Tax allowances for business users
• VAT free - no VAT on payment