From PCP to logbook loans, there are a myriad of loans on offer attached to cars, although it can be daunting, we thought we should take a look at each one.
A personal loan is a much favoured way of buying a car, you own the car outright with no mileage restrictions. Unfortunately borrowing from a bank, building society or other lender on a personal loan also makes it an unsecured loan, meaning if you default on the loan, unlike dealer finance where only your car can be repossessed, any of your assets can be seized.
PCP (personal contract purchase)
With PCP, there is a deposit to pay, plus monthly repayments usually from 12 to 36 months. At the end of the repayment term, there are 3 choices-
1-Return the car to the dealer
2-Keep the car and pay the final balloon payment, this is a payment which will have been agreed upon and written into contract, when taking out the PCP. The GFV (guaranteed future value)
3-Use the value (GFV) in the car as a deposit for a new car.
PCH (personal contract hire)
PCH is similar to PCP with one notable difference, at the end of the contact period, you simply hand the keys back to the dealer, there is no option to purchase the vehicle as in effect you are simply renting it for the contract period.
HP (hire purchase)
A popular choice is hire purchase, under this agreement there is a deposit to pay and fixed monthly payments. The car officially belongs to the hire purchase company until the last payment has been made, when this has been done the car then belongs to you.
This is completely different to the other choices as logbook loans can only be considered when you already own a vehicle with no outstanding finance. This is usually taken out by people whose credit record wont allow them a traditional loan, or need cash fast. As the risk to the lender is high, so are the interest rate repayments. Here is an online logbook loans company that allows you to view repayments via an online calculator.
With each of these loan choices we ask you to get professional advice or at least do your homework. Apart from your home, a car is likely to be your next biggest purchase.
– Shop around and negotiate where you can.
– Don’t just look at the rate and monthly repayments, look at the total amount repayable.
– Look at any additional fees, such as admin fees or early repayment fees.