Guaranteed Car Lend

How to Determine the Best Car Loans or Vehicle Finance by Jody Aird

Obtaining a car loan or vehicle finance is not as straight forward as it once was. Different financing methods suit different buyers depending on their lifestyle and credit history.

The overview below helps highlight the differences between the prime vehicle financing solutions in the market.
Bank Loan
The money is obtained in advanced to buy the car outright. The debt is repaided in agreed monthly instalments to the lender.

Advantages:

1. Car dealers usually prefer cash buyers and better prices can be negotiated.
2. The car is completely owned from when the documents are signed.

Disadvantages:

1. Standard Loans can be more difficult to be approved than car loans or vehicle finance.
2. Dependant on the amount the loans can be restricted just to homeowners.
3. Two main types of loans; Secured and unsecured. Secured will ensure cheaper monthly repayments buy over a long term. However, the lenders can repossess the security that is offered. It has been known for homes to be lost because repayments have not be met.
4. Difficult to obtain if there is a history of bad credit such as, CCJ's or adverse credit.

Hire Purchase
A deposit negotiated (sometimes can be nil) and fixed amount are paid per month for the agreed period. Primarily available on new cars or of less than 2 years old. There are providers such as http://www.creditplus.co.uk/prime/motorfinance.html who will do hire purchase on used cars up to 10 year old.

Available from: HSBC, Lloydstsb, Cahoots, Egg loans and any other leading lender.

Advantages of hire purchase:

1. Poor Credit buyers will be looked on more favourable as there is security in the vehicle.
2. A higher lend is available if you have credit problems in comparison to straight loans
3. Quick to obtain.
4. Better rates than some standard loans especially on new vehicles.

Disadvantages of hire purchase:

1. Car is not the property of the buyer until the agreement has finished.
2. If repayments are missed the vehicle finance company can repossess the car and sue the buyer for anything owed.

Available from www.creditplus.co.uk , www.contracthireandleasing.com Other hire purchase lenders can be found at: http://www.ukmotoringdirectory.co.uk/motoring.php?id=1892

Looking for further advice on hire purchase: www.oft.gov.uk/Consumer/Hire+purchase

Personal Contract Purchase (PCP)
PCP is similar to hire purchase, that a deposit is paid and an agreed number of monthly repayments. A final payment is agreed at the start and is known as the guaranteed minimum future value (GMFV) sometimes known as a balloon payment. The GMFV must be paid if the car is kept. If the car is part-exchanged the deposit will not be refunded and will be put towards the deposit on the new car.

The major difference from hire purchase is that after the contract period the car can be kept, hand it back or part-exchange for another new car. Available for new and nearly new cars only. The GMFV must be paid if the car is kept.

Advantages of PCP:

1. Excellent rates on the monthly repayments.
2. Easy maintenance packages.
3. Balloon payments
4. Keeps payments low.
5. Constantly have the latest vehicles on the market.

Disadvantages of PCP:

1. Expensive method in the long term.
2. Car is owned by the finance company until the end of the contract.
3. Penalties for early settlement.
4. Restrictions on annual mileage limited.

Available from: http://www.creditplus.co.uk/prime/motorfinance.html http://www.lexfreechoice.co.uk Other PCP lenders can be found at: http://linkcentre.com/cars/Car-Hire/Personal-Contract-Purchase

The most suitable finance depends on your circumstances however one thing to be sure about is that finance can be achieved not matter what the financial status.

To compare hire purchase and PCP side by side: http://www.creditplus.co.uk/prime/financecalculator.html

About the Author

Underwriter for car finance specialist: www.creditplus.co.uk