Motor Finance for Personal Use
Personal
Contract Purchase
Personal Contract Purchase (PCP) is a conditional sale agreement. It is structured as the customer contracting to purchase the vehicle over a defined period of time. Typically it incorporates full maintenance (as does Contract Hire). Usually there is a final balloon payment (a one off large final payment), after which the legal ownership passes to the customer.
The customer has 3 options when the end of contract is reached:
- Return the vehicle to the leasing company
- Purchase the vehicle at the pre-determined residual value (balloon payment)
- Retain the vehicle and re-finance the balloon payment.
Hire Purchase
A more traditional way of financing vehicles. Hire Purchase (HP) is rapidly losing ground since the introduction of newer and more suitable finance products, especially in a market of falling residual values. HP is a fixed cost & period loan that supports a purchase. The customer is effectively the owner but title doesn't pass over until the loan is repaid fully. Since it constitutes a loan, monthly HP payments do not carry VAT.
Outright Purchases Using an Unsecured Loan
If a customer wishes to purchases a vehicle outright there are two main options; either sufficient fund are available for the customer to pay cash or they may borrow from a bank, usually in the form of an overdraft or personal loan.
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