So you’ve decided to buy a car, but how should you finance it? Our comprehensive guide takes you through the pros and cons of all the options
was ranked as the second most popular car-buying method in our whatcar.com poll, accounting for 25% of the votes.
If you keep the car, you have to make a final ‘balloon’ payment. This amount is the car’s guaranteed future value, or GFV, which is set at the start of the agreement. You have to pay a deposit with an HP deal, which is usually around 10%, followed by fixed monthly payments. HP agreements can include and ‘option to purchase’ fee, which you may have to pay to formally become the owner of the car at the end of the term. Up to that point, you don't own the vehicle and you have no legal right to sell it.
The word ‘hire’ tells you what PCH is all about, because you’re basically renting a car. PCH contracts typically last for two or three years, with an agreed mileage limit of around 10,000 miles a year. There’s no option to buy the car at the end of the contract; you just hand the keys back to the finance provider. Your payments are effectively just covering the car’s depreciation.
Go for PCH if you say yes to one or more of these statements: you don’t want to own a car; you like being able to change cars frequently; you like the idea of driving better cars than you could normally afford; you don’t mind not having the option to buy the car.platform for the best leasing deals on the market.Research is all-important here, because there is no point haggling a good price for your new car and your trade-in if you’re going to throw it all away on a poor dealer finance package.
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