When you apply for car finance, you’ve usually got the personally important factors settled: the car you want, the colour you want it in and maybe an idea of the optional extras you’d like included too. But what you might not have fully considered in all this are the options open to you on your car finance buying journey. And that’s where our Car Finance Options Tool comes in very handy.

A wise man once said ‘It’s not about the destination; it’s about the journey’, and he was right. While obtaining the car you want is the ultimate goal, you need to go on the car finance journey first to not only work out what you can afford to pay for your new car, but also what the best option is for you based on your individual circumstances. At Creditplus, we have a number of car finance options available but, for the purposes of keeping it simple, we’ll delve into our three most popular options; Personal Contract Purchase, Hire Purchase and Lease Purchase.

Personal Contract Purchase (PCP)

Ideal for you if...

• You’re interested in a new or nearly-new car
• You’re likely to change the car every 2 to 3 years
• You want to own the car at the end of your finance agreement.

The benefits of this car finance option are…

• Lower monthly payments
• Easy option to either return the car, pay a balloon payment to keep the car or use the car as a part exchange on your next car.

What’s a ‘Balloon Payment’?
This is a large final payment which must be paid in order for you to take ownership of the car. A balloon payment is calculated based on the Guaranteed Future Value of the car, which itself is based on the Residual Value of the car (what the car will be worth at the end of the finance agreement). Residual Value is calculated based on information from trade guides and takes into consideration factors including depreciation, mileage and the car’s condition.
In PCP finance agreements, the Guaranteed Future Value will not change. This means the balloon payment you were quoted at the beginning of your agreement will not change. This is also regardless of the current market value of the car at the end of the agreement.

Hire Purchase (HP)

Ideal for you if...

• You’re interested in a new or nearly-new car
• You’re not likely to change the car every 2 to 3 years.

The benefits of this car finance option are…

• Fixed monthly payments
• Option to pay off the total amount early.

Tell me more?
A Hire Purchase car finance agreement is where you borrow a set amount of money over an agreed period at a fixed interest rate. The amount borrowed and the total interest is divided across the entire agreement, meaning you pay the same amount each month. You can also pay off the total early.

Lease Purchase (LP)

Ideal for you if...

• You’re interested in a new or nearly-new car
• You’re likely to change the car every 2 to 3 years
• You don’t want to own the car at the end of your finance agreement.

The benefits of this car finance option are…

• Fixed monthly payments
• Option to defer some of the total cost to the end of the finance agreement.

Tell me more?
Lease Purchase finance agreements come with a balloon payment. Whereas you have additional options at the end of a Personal Contract Purchase (pay a balloon payment, return the car or use the car as part exchange on your next car), you must pay a balloon payment at the end of a Lease Purchase agreement in order to take ownership of the car.

Our Car Finance Option Tool has been designed to assist you in finding the best finance option for your individual circumstances. By answering a few straightforward questions - including if you think you want to own the car at the end of your finance agreement or if you want to change your car regularly - you’ll have your answer quickly, allowing you to go ahead and apply for the car you want with the best finance option for you.

Ready to apply for car finance?

Hopefully we’ve given you some useful advice on your car finance options. If you’re ready to apply, it’s a simple 2 minute process that won’t affect your credit file as we perform a ‘soft search’ when you apply that doesn’t leave a footprint on your file. What’s more, we’ll compare more than 100 lending options to find you the best car finance deal so you’ll soon have the finance you need for the car you want. You can also work out how much you can afford by using our Car Finance Calculator.

Concerned about your credit rating? We can still provide car finance to those with a poor or bad credit history. Find out more over at our dedicated bad credit car loans page.