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Car Finance Explained

When it comes to financing your car, there are many options that are available to you, however it can become confusing. How do you know which one is for you? What does PCP and PCH mean?

Desira is here to help you every step of the way. This page will explain the different financing options you can have with us.

If you need help or have any questions for us, then enquire below or visit your local Desira dealership where are sales execs are ready to help.

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What is Hire Purchase (HP)?

This is secured against the vehicle itself and you do not own the car until you have made the final payment – you can’t sell it without the lender’s permission, although you can return it.

You typically pay a deposit (often 10%) and then repay the balance in instalments, plus interest, over the loan period. At the end of the loan period, you own the car outright.

Be aware that: the car can be repossessed if you miss a payment. Servicing may be included, but check all terms and conditions.

What is Personal Contract purchase (PCP)?

This type of plan typically involves paying a deposit then low monthly instalments over a fixed period. At the end of this, you can either pay a lump sum (‘balloon payment’) to purchase the car outright, return the vehicle or sell it privately to pay off the remainder.

This will suit you if you prefer to change your car more frequently, and is based around a ‘minimum guaranteed future value’ (MGFV) for the car.

Be aware that: it’s important to stick to the agreed mileage limits and to keep the car in good condition to avoid penalties. You are hiring the car and will not own it until the balloon payment is made. It may be less cost-effective than HP if you plan to keep the car, however.

What is Personal Contract Hire (PCH)?

This is similar to PCP, again with low monthly payments, but there will be no option to buy the car. However, it is convenient and it’s easy to change the car. The type of car, length of contract and agreed mileage limits determine the overall leasing cost. Normally, you will have to pay up to three months’ rental in advance. Extras such as servicing may be included. Again, mileage limits may apply. Make sure you compare deals taking into account APR, the monthly payments over the loan period, and the total amount repayable, as well as any further ‘option to purchase’ and administration fees.

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