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A Guide to Car Finance: HP and PCP

A Guide to Car Finance: HP and PCP

There are numerous types of car finance to consider and with each working slightly differently, it can be complicated to understand the ins and outs of each.

This guide will cover everything you need to know about HP and PCP car finance, so you will better understand what’s involved when it comes to buying a new or used car.

Read on to get started.

Purchase Contract Purchase

What is PCP?

Personal Contract Purchase (PCP) is one of the most popular finance options that people choose.

You can take a PCP agreement out on a new or used vehicle, and the Guaranteed Minimum Future Value (GMFV), deposit amount and fixed monthly payments will be determined once the mileage limit and agreement length is confimed.

How does PCP work?

An initial is paid, which can either be a cash payment, part-exchange, or a combination of both options. After the deposit is paid, the contract will begin and your fixed monthly payments will start.

There may be a ‘zero deposit’ on some agreements, however, this will mean that your monthly payments will be higher than if you put down a deposit.

The PCP finance option is a popular choice with many drivers because it gives you three options at the end

1. You can simply end the agreement once all monthly payments have been made and return the car to the lender.

2. At the start of your agreement, an ‘Option to Purchase’ fee may be agreed, which gives you the option to buy the car once the payments have ended, along with the GMFV.

3. You can part-exchange or trade your car in for a new model and start a new agreement.

Please note: You may incur further charged if the vehicle is damaged, or if you have gone over the agreed mileage limit.

Who is PCP suitable for?

If you’re a private buyer and looking for multiple options at the end of your agreement, then a PCP agreement could be the right choice for you.

For more information and to find out if a PCP agreement is the right choice for you, enquire online, give us a call, or pop down to your local Vertu Motors dealership today, where one of our friendly team members will help you get started.

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Hire Purchase

What is HP?

Hire Purchase is another popular finance option for many motorists.

It’s really simple to follow. Drivers pay a deposit followed by monthly payments, with interest included, and at the end of the agreement, they have the option to own the car if they pay an ‘Option Fee’.

How does HP work?

The initial deposit is usually at least 10% of what the car is priced at. This can either be paid in cash or as a part-exchange, or both. Once this is paid, you will begin paying the monthly payments for a fixed period, and at the end of the agreement, you are able to pay the ‘Option Fee’, which will give you full ownership of the vehicle.

Who is HP suitable for?  

Hire Purchase is a great option for both private and business customers, especially if you want to own the vehicle at the end of the agreement.

To learn more about car finance, feel free to call us today to discuss your options and we will help you get started.

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