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Wave Car Finance offers a hassle-free way to drive the car you want without the complexities of purchasing outright. If you're considering car finance, it's natural to have questions about financing a new or used car. You will want to know the best options available, the cheapest route, and the duration of finance. Here, we address these queries and highlight the benefits of car finance, helping you determine the right type for your needs.
Should I buy a car on finance?
Deciding whether to buy a car on finance depends on your personal circumstances. Various types of car finance exist, including Personal Contract Purchase (PCP), Personal Contract Hire (PCH), and Hire Purchase (HP). Each has its own conditions and advantages. To understand the differences and nuances between these options, you should consider what each type of car finance has to offer and which aligns better with your personal goals, lifestyle needs and financial circumstances.
There are some conditions and restrictions that come along with car financing. These include:
Your acceptance for car finance may depend on your credit score (the better your score, the higher your chances of approval with better rates).
Mileage restrictions (depending on the type of finance you select).
Non-ownership of the vehicle outright (this applies to some finance options).
Possible extra charges for poor maintenance (if you don’t look after the car well).
What is Personal Contract Hire?
Personal Contract Hire is a form of car leasing where you rent a vehicle for a fixed period, typically between two to four years, and make monthly payments. At the end of the contract, you return the car without any ownership obligations.
Benefits and advantages of PCH:
Lower Monthly Payments: PCH often offers lower monthly payments compared to other finance options since you are not purchasing the car.
Maintenance and Servicing: Most PCH agreements include maintenance and servicing costs, providing a hassle-free ownership experience.
Vehicle Upgrade: At the end of the contract, you can easily switch to a new car, staying up-to-date with the latest models and technology.
Fixed Budgeting: Monthly payments are predictable, allowing for better budgeting and financial planning.
Disadvantages of PCH:
No Ownership: With PCH, you do not own the car, and you have no equity in the vehicle.
Mileage Restrictions: PCH agreements typically come with mileage limits. Exceeding these limits may incur additional charges.
No Customisation: Since you don't own the car, you cannot make modifications or customization to suit your preferences.
Suitable For: Personal Contract Hire is suitable for individuals who prefer lower monthly payments, enjoy driving new vehicles, and do not wish to deal with the responsibilities of ownership, such as depreciation and selling the car.
What is Personal Contract Purchase?
Personal Contract Purchase is another form of car financing where you make monthly payments to use a vehicle for a fixed period. However, PCP offers the flexibility of deciding whether to purchase the car at the end of the contract or return it.
Benefits and advantages of PCP:
Lower Monthly Payments: Similar to PCH, PCP generally offers lower monthly payments compared to traditional financing options.
Flexibility at the end: At the end of the contract, you have options: you can return the car, purchase it by paying a balloon payment (final lump sum), or use any equity in the car as a deposit for a new PCP agreement.
Guaranteed Future Value: PCP agreements often include a Guaranteed Future Value (GFV), which estimates the car's worth at the end of the contract. This provides clarity on the car's depreciation and potential equity.
Upgrade Opportunities: PCP allows you to upgrade to a new car at the end of the contract, providing access to the latest models.
Disadvantages of PCP:
Mileage Restrictions: PCP agreements usually come with mileage limits. Exceeding these limits may result in additional charges.
Balloon Payment: If you decide to purchase the car, you'll need to make a balloon payment, which can be a significant lump sum.
Ownership Considerations: Owning the car means you're responsible for maintenance, repairs, and selling the vehicle if you decide not to keep it.
Suitable For: Personal Contract Purchase is suitable for individuals who want the option to own the car at the end of the contract, desire lower monthly payments, and enjoy the flexibility to upgrade to a new vehicle regularly.
What is Hire Purchase?
Hire Purchase is a financing option where you pay fixed monthly installments to purchase a vehicle over a set period. Unlike PCP, there is no balloon payment at the end, and you become the owner of the car once all payments are made.
Benefits and advantages of HP:
Ownership: With Hire Purchase, you own the vehicle once you complete all the payments.
No Mileage Restrictions: Unlike PCH and PCP, there are typically no mileage restrictions with Hire Purchase agreements.
Equity Accumulation: As you make payments, you build equity in the vehicle, which can be used for future trade-ins or as a deposit for a new purchase.
Flexibility: You have the freedom to customize the car to your liking and use it without worrying about potential penalties.
Disadvantages of HP:
Higher Monthly Payments: Monthly payments for Hire Purchase tend to be higher compared to PCH and PCP since you're purchasing the car.
Depreciation Risk: As the owner, you bear the risk of the car's depreciation, which could affect its value over time.
Longer Commitment: Hire Purchase agreements are usually longer-term commitments, typically ranging from three to five years.
Suitable For: Hire Purchase is suitable for individuals who prioritize ownership, prefer to customise their vehicles, and are willing to commit to higher monthly payments to eventually own the car outright.
11 benefits of car finance
If approved, numerous advantages come with buying a car on finance.
1. No Hidden Costs: When buying a car on finance with Wave Car Finance, your monthly payments will be fixed from the start. This means no hidden costs or fees involved. Additionally, certain lease deals can include maintenance costs, ensuring a worry-free ownership experience.
2. No Upfront Deposit Required: One of the great advantages of buying a car on finance with Wave Car Finance is the option for a £0 deposit. This means you can get the car you want without the need for an upfront payment.
3. Qualification with Imperfect Credit: Even if you have less-than-perfect credit, it doesn't automatically disqualify you from car finance. Wave Car Finance is committed to helping customers secure car finance regardless of their credit scores. By working with various funders, they can match individuals from all credit backgrounds with the right car finance lender.
4. Potential Credit Score Improvement: Timely payments on your car finance can have a positive impact on your credit rating. By demonstrating reliability and repayment capability, you can improve your credit score, making it easier to secure future loans and potentially receive better terms and lower monthly payments.
5. Ease on Bank Balance: Buying a car on finance eliminates the need for a large upfront payment. The cost of the vehicle is spread over fixed monthly payments, allowing you to keep your bank balance intact while still getting the car you desire.
6. Trade-in Opportunities: Wave Car Finance offers the option to part-exchange your current vehicle within the finance agreement. This simplifies the process of upgrading to a new car without the hassle of selling your current one privately.
7. Hassle-Free End of Agreement: At the end of your agreement, you have choices. You can return the car, part-exchange it for another, or keep it as your own, depending on the type of finance you choose.
8. Use Your Current Vehicle as a Deposit: If your current car has equity, meaning its value exceeds any outstanding finance, you can trade it in and use it as a deposit, reducing your monthly payments on the new vehicle.
9. Access to Newer Cars: Car finance allows you to enjoy a newer car than you might be able to afford outright. With lower monthly payments, even higher-end models become more accessible, providing you with a more enjoyable driving experience.
10. Increased Security and Flexibility: Including maintenance in your finance agreement provides added security, as it covers costs such as MOTs, servicing, and tire replacements. Car finance also offers flexibility, giving you the choice to keep, return, or part-exchange the vehicle atthe end of the agreement based on your preferences and needs.
11. Frequent Car Changes: Car finance enables you to switch cars more frequently, allowing you to experience newer models with the latest technology, improved reliability, and better fuel economy. This flexibility ensures that you can stay up-to-date with the latest advancements in the automotive industry.
See what Wave Car Finance can offer you
Wave Car Finance is dedicated to finding affordable and convenient car leasing options tailored to your financial circumstances. With our commitment to providing instant decisions through soft credit searches, your credit score remains unaffected.
Use our fast and easy Apply Now to discover your likelihood of approval for car finance. Wave Car Finance is here to help you find the right car finance solution that suits your needs and budget.