lender Archives - My Car Credit

Can You Get Cars on HP with No Deposit?

Man with car in front of car bought on HP with no deposit

Purchasing a new car can often feel like a tightrope walk, especially when you’re trying to balance the excitement of choosing your dream make and model with budget constraints. If you’ve been eyeing that perfect set of wheels but the upfront cost seems daunting, no deposit hire purchase could be a clever solution.

Designed to bypass the large initial deposit typically required for hire purchase (HP) agreements, no deposit plans can be a great way to secure the keys to a new car, without parting with a large sum of cash.

Want to know more? Let’s unpack the possibilities and perks of cars on HP no deposit to see if it’s the right move for you.

Understanding hire purchase (HP)

Hire purchase is a bit like the reliable workhorse of car finance options – simple, straightforward and with no unnecessary frills. One of the main features of HP is that agreements end with you owning the car outright. The model splits the cost of your new or used car into manageable monthly payments over a period that you choose, usually one to five years.

The main difference from other plans, like personal contract purchase (PCP), is that you’re working towards ownership right from the start – every payment brings you closer to claiming those keys for good.

Why consider no deposit HP?

Traditionally, HP deals ask for a deposit, often around 10% of the car’s price. This is paid straight out of your pocket. It’s a fast track to car ownership, sure. But it’s also a fast drain on your savings. This is where no deposit options come into play, offering a lifeline to motorists who don’t have access to large sums of cash, or want to preserve their capital. Here’s a closer look at who no deposit hire purchase works for:

First-time buyers: Accelerate your journey to car ownership without the time delays associated with saving up a deposit.

Motorists with immediate needs: Get a car quickly, perhaps for a new job or unexpected family growth, without waiting to save enough funds.

Cash flow savers: Keep your savings intact for other life essentials or unexpected expenses.

Top benefits of no deposit hire purchase

Purchasing cars on HP no-deposit plans can be a great option for all kinds of motorists, from first-time buyers to motorway veterans. Here’s a closer look at some of the top benefits of HP with no deposit.

Fast access to a car: Jump straight into the driver’s seat without saving for the initial lump sum. This is car finance, in the fast lane.

Maintain cash flow: Avoid the upfront financial hit and keep your budget breathing easy. No deposit hire purchase gives you more freedom to manage monthly expenses or even splurge on a road trip or two.

Better car options: With no deposit to factor into your budget, you may be able to afford a car with a few extra bells and whistles. For example, a model with the latest infotainment technology, or something with a fuel-efficient hybrid engine.

Predictable budgeting: Fixed monthly payments mean no surprises. You’ll know exactly what you need to pay each month for your car, making it easier to budget for everything from rent and groceries to holidays and entertainment.

Clear path to ownership: Once the final payment is made, the car is all yours. No balloon payments, no residual value calculations and no hidden costs. Just your car, your way.

Things to consider

While no deposit HP sounds like a dream, it’s not without its considerations. Here’s what to keep in mind when shopping around for cars on HP with no deposit.

Higher monthly payments: With no deposit HP agreements, you’re spreading the entire cost of the car across the payment period, with no deposit to reduce the monthly instalments.

Total cost of borrowing: Financing the full purchase price of the car usually means paying more interest over time. It’s worth doing the maths to see how it tallies up against a deposit-based deal.

Credit score impact: Good credit is often crucial for securing a no deposit deal. This is because lenders take on more risk when they don’t collect an upfront payment.

Securing a no deposit hire purchase agreement

Ready to proceed with a no deposit hire purchase agreement? Here’s how to get started in three easy steps:

1. Compare lenders

Not all lenders offer no deposit options, so shop around for those that do. You’ll also see variation between interest rates, terms, conditions and other variables, so it’s worth doing your research to find the right fit.

2. Credit check

Make sure your credit score is in good shape to improve your chances of approval for cars on HP no deposit.

3. Understand the full terms

Before signing on the dotted line make sure you understand all the details, from interest rates to payment schedules. This will help ensure there are no surprises down the road.

Find no deposit hire purchase deals with My Car Credit

With myriad benefits on offer, a no deposit hire purchase agreement could open up new possibilities for managing your finances while securing the car you’ve been dreaming of. No deposit plans are about more than just convenience. They’re about making smarter choices that align with your lifestyle and budget. Whether you’re upgrading from an older model or venturing into car ownership for the first time, HP with no deposit is worth a closer look.

Ready to take the next step? Check out our car finance calculator to get the wheels moving on your next car.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

How Does PCP Work at the End of the Term?

person circling end of PCP term in a calendar

There are many kinds of car finance. The right one for you will depend on your unique needs and circumstances.

One of the most common and popular types of car finance is PCP or personal contract purchase. But what is PCP car finance, and how does it work at the end of term?

This article will break down what PCP car finance is and what you can expect at the end of the term, helping you decide if this type of agreement is right for you.

What is PCP car finance?

PCP car finance is one of the most popular car finance agreements for UK drivers.

With PCP, you borrow a pre-determined amount of money against the cost of a new or nearly new vehicle. You then pay that money back via a series of affordable monthly instalments.

PCP is a popular type of car finance because the monthly repayments are lower compared to other car finance agreements. This is because you pay an initial deposit (although there are zero deposit options available for those with excellent credit) and then a significant amount of your borrowing is deferred to what’s known as either a balloon payment or an optional final payment.

The longer your PCP contract is, the lower the monthly payments will be, as you’re spreading the cost more thinly. That said, you can expect to pay more interest because you’re essentially borrowing money for longer.

The final balloon payment is a lump sum that you can choose to pay at the end of your agreement’s term. By making this payment, along with a small option to buy fee, you’ll own the car outright.

With PCP car finance, you don’t have to make this final payment at the end of term – it’s optional. You can alternatively choose to hand the vehicle back, provided the vehicle is in good working order.

Be aware that you will face mileage restrictions with PCP and can face penalties if you cause more than fair wear and tear to the vehicle.

How does PCP work at the end of term?

At the end of term on a PCP car finance agreement, you won’t own the car outright.

To do so, you’ll need to make an optional final payment – also known as a balloon payment.

The balloon payment is calculated based on what’s known as your car’s guaranteed future value, or GFV. The GFV is calculated according to the anticipated depreciation of your car over the term of your finance agreement. This number is based on variables, including your initial estimate of your yearly mileage, the vehicle’s make and model, and the length of your PCP agreement.

You’ll subsequently face penalties if you breach this predicted mileage or if you return the vehicle with excessive wear and tear. These penalties are applied because overuse of the car can impact its GFV.

The GFV is a fixed cost – it won’t rise or fall, even if the value of your car fluctuates.

As such, you can sometimes find yourself in the advantageous position of having a vehicle for which the GFV is higher than its actual value, which puts you in positive equity. We explain more about that below.

What to do at the end of your PCP term

You have three options at the end of a PCP agreement.

Make the balloon payment

If you want to own your car outright at the end of a PCP term, you can make the final balloon payment.

This is a great option if you don’t want to return a car that works well for you.

Return the vehicle

With PCP car finance, the final balloon payment is optional – you can choose just to hand the vehicle back.

This is a sensible option if your car is worth less than the GFV through no fault of your own.

Provided that you’ve kept the car in good condition and within your mileage restrictions, you can hand the vehicle back and won’t have any final payment to make to the lender at the end of your PCP term.

Part exchange the vehicle

You may find yourself in ‘positive equity’ at the end of your PCP term.

This means that your car is worth more overall than its GFV. You can leverage this positive equity to your benefit by making the final balloon payment and selling the vehicle for a profit.

Alternatively, you can part exchange the vehicle for a newer model and use this equity as a deposit towards your next car.

Many drivers like PCP car finance because it enables this process of part exchange, allowing them to regularly update their vehicle for a newer, higher spec option.

I can’t afford my end-of-term PCP payment – what do I do?

If you can’t pay the balloon payment at your PCP agreement’s end of term, you have some options.

Remember that this balloon payment is optional with PCP – you don’t have to pay it. You can instead choose to hand the vehicle back. But by doing so, you will be giving up your right to use the vehicle – not ideal if you need regular use of a car. You’ll also then need to find another car finance agreement to fund your next set of wheels.

Alternatively, you can secure balloon payment finance. This allows you to break down the balloon payment into manageable monthly instalments.

Discover if PCP finance is right for you with My Car Credit

PCP continues to be a popular car finance agreement for thousands of drivers around the UK.

Try our online car finance calculator to understand just how My Car Credit can find the right car finance for you.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

PCP: Is It Worth It?

Car Finance or Personal Loan – Which is Best for You?

Can I Finance an Automatic Car?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

ballon payment balloon payment finance car finance car finance options Jan24 lender part exchange PCP used car

Used Car Loan Process Explained

Steering wheel of a car using a used car loan

From sidestepping initial depreciation to avoiding long waitlists, used cars come with myriad benefits.

Like new models, car loans can be a great way to fund the purchase of a second-hand vehicle. Even better, navigating the used car loan process doesn’t have to feel like manoeuvring a busy roundabout during rush hour. With the right information, securing finance for a used car can be straightforward and stress-free. Whether you’re eyeing a sturdy family estate or a compact city runner, read on for an easy, six-step guide to the used car loan process.

Step 1: Assess your financial situation

Before you kickstart your loan application, take a good look at your financial health. Crunch your numbers and decide how much you can afford to pay each month while maintaining a comfortable lifestyle and keeping up with other financial responsibilities. Don’t forget to include other car-related expenses such as insurance, maintenance, and fuel.

It’s worth checking your credit score, which will play a significant role in the terms you might receive and your interest rate. A higher credit score can unlock more favourable loan conditions.

Step 2: Choose the right vehicle

Be mindful that your choice of vehicle can influence your loan terms and overall chance of approval. Older models or cars with high mileage might be harder to finance as they’re considered less reliable. Settling on a few options before approaching lenders can help streamline the used car loan process.

Step 3: Shop around for the best deals

Don’t accept the first loan offer you receive, even if it seems like a great deal. Compare rates from different lenders, including high street banks, credit unions and specialised auto finance companies. Working with a broker can be a great way to expand your horizons and shop around for the best deals when navigating the used car loan process.

Step 4: Understand the terms

It’s important to understand all the terms and conditions of your loan. Look beyond monthly payments and evaluate variables like interest rate, loan duration and any fees associated with early repayment or late payments.

Longer loan terms can make monthly repayments more affordable, but it’s important to remember that you’ll be making more payments and, therefore, paying more interest over time. Assess whether a longer car finance term is truly beneficial for you in the long run. To put things into perspective, the latest data from Experian reveals the average auto loan term for used cars is 67.4 months, while average car leases are just under 36 months.

Step 5: Finalise the loan and purchase your car

After choosing the best loan offer, it’s time to submit your paperwork. This typically involves providing proof of income, identity, and other key documents. Once the loan is approved, the funds are transferred directly to the dealership or your personal bank account, dependent on the type of agreement. You can then purchase your used car and get behind the wheel!

Step 6: Repayment and beyond

With the loan secured and the car keys in hand, focus shifts to repayments. Setting up automatic debits during the used car loan process can help avoid missed payments and potential fees. Consider making extra payments to reduce the interest amount and shorten the loan term.

Check out our fantastic online car finance calculator today to discover the right car finance for you.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

7 Advantages of Used Car Hire Purchase

How Do Car Finance Calculators Work?

5 Different Ways to Pay for a Car

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

application application process car finance car finance options car loan Jan24 lender repayments used car

PCP Term: Everything You Need to Know

Woman leaning out of a red car purchased on PCP

Car finance continues to appeal to drivers across the UK because it’s a flexible, affordable way of funding the purchase of a new, nearly-new or used set of wheels.

PCP car finance is one of the most popular types of auto finance agreement. With lower monthly repayments and flexible deposit options compared to other car finance choices, there’s a reason why drivers nationwide continue to choose PCP car finance.

With that said, PCP is a little more complicated than other car finance options because of the end-of-term options. We break down everything you need to know about a PCP term below.

What you need to know about a PCP term

Personal contract purchase (PCP) car finance is a flexible agreement that offers lower monthly repayments compared to other types of car finance.

With PCP, you’ll be splitting the price of your vehicle into three chunks – a deposit, your monthly repayments, and an optional final payment that’s also known as a balloon payment.

A PCP term is typically anywhere from 36 to 60 months, or three to five years. The longer the term of your PCP finance agreement, the lower the monthly repayments will be, as the cost is being spread over a longer term. However, you will generally pay more interest overall because you’re borrowing money for a longer period.

How does the end of a PCP term work?

With PCP, you won’t own the car outright at the end of your agreement, unless you choose to make an optional final payment, also known as a balloon payment, along with a small option to purchase fee,.

In fact, it’s because of this optional final payment that the monthly repayments on PCP are lower compared to other car finance agreements.

However, it does mean that you need to decide whether you want to make this final payment once you reach the end of your PCP term.

Bear in mind that this payment is optional with PCP – you don’t have to make it. You can always choose to hand the car back, and you won’t face any surplus charges, provided you haven’t caused undue damage to the vehicle and the vehicle is within the contracted mileage.

Alternatively, you can make the final balloon payment and you’ll formalise ownership of the vehicle. Balloon payment finance can help to make this final lump sum more affordable by breaking it down into manageable chunks – much like any other car finance agreement.

You can also choose to part exchange the vehicle for a higher spec model if you find yourself in ‘positive equity’. This happens when the car is worth more than the lender anticipated at the end of your PCP term and is a great option for drivers who like to update their car for a newer model.

Find out more about PCP finance today

If you are looking to start your car-buying journey, check out our online car finance calculator to crunch those numbers and take your first step to owning your next dream car.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

What is a Guarantor Loan?

Bank Loan or PCP: Which is Right for You?

HP, Conditional, PCP: The Lowdown on Car Finance Options

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

ballon payment balloon payment finance car finance car finance options Jan24 lender PCP used car

Paying for a New Car with a Loan – How It Works

Couple stood next to a silver car bought using a car loan

Whether you’re buying your first car or upgrading an existing set of wheels, purchasing a new vehicle is exciting. But for many Brits, the question of how to bankroll it can be daunting.

This is where car loans come in. Suitable for both new and used vehicles, car loans and finance make paying for a new car convenient and accessible.

Want to know more about how an auto loan can help you navigate the road to a new car? Read on as we unpack the ins and outs of paying for a new car with a loan, exploring everything from the application process to repayment options.

Understanding car loans: the basics

Let’s start with the fundamentals. Car loans are a type of financing product specifically designed for auto purchases. They allow you to borrow a certain amount of money from a lender, which you then repay over time, usually with interest.

Choosing the right loan

When it comes to paying for a new car with a loan, one size does not fit all. Before applying, it’s essential to consider your individual circumstances and preferences. Here are some key factors to keep in mind when vetting lenders and loan products:

Loan amount: Determine how much you need to borrow based on your budget and the cost of the car, as well as any additional fees.

Interest rate: Shop around for competitive interest rates to ensure you’re getting the best deal possible. Variables like your credit score can impact the interest rate offered when paying for a new car.

Loan term: Agree on the length of the loan, keeping in mind that longer terms can unlock lower monthly payments but higher overall interest costs.

Additional fees: Ask about any additional charges, such as late payment fees. Some lenders may also charge extra for early repayments. Ask lots of questions to avoid unwelcome surprises down the line.

Types of car loans

When exploring car financing options, you’ll see various types of loans tailored to different needs. There are a few acronyms to decipher, but really, it’s quite straightforward, and there’s no need to be intimidated. Here’s a breakdown of the main ways of paying for a new car in the UK with a loan.

Hire Purchase (HP): With HP loans, you pay a deposit upfront (although there are plenty of zero deposit options too), followed by fixed monthly payments over the lifetime of the agreement. Once you’ve made all the payments, you own the car outright. HP is a clear-cut financing option suitable for those with an end goal of full ownership of the vehicle.

Personal Contract Purchase (PCP): PCP lowers monthly payments by deferring a significant chunk of the loan amount to the end of the agreement. At the end of the term, you can choose to return the car, provided the vehicle is in good condition and within the contracted mileage, trade it in for a new model or make a final ‘balloon payment’ along with a small option to purchase fee to own the vehicle outright.

Personal Contract Hire (PCH): PCH is similar to PCP but involves leasing the car rather than owning it. You pay fixed monthly payments for the duration of the lease and return the car at the end of the agreement. It’s a great option if you love to drive the latest models. However, PCH agreements often include mileage restrictions and wear-and-tear guidelines.

Personal Loans: Personal loans can be used for various purposes, including paying for a new car. You receive a lump sum of money from the lender, which you then repay with interest over time. Personal loans offer flexibility, but the options may be limited for those with a poor credit profile.

The application process: what to expect

Once you’ve done your homework and selected a suitable loan, it’s time to apply. Here’s what you can expect during the application process:

Documentation: Prepare requested documents, including proof of identity, income verification and details about the car you want to purchase.

Credit check: The lender will request a credit report to evaluate your status and set the terms of the loan. A healthy credit score can improve your chances of approval and result in more favourable terms, including lower interest rates.

Approval decision: After reviewing your documents and credit rating, the lender will either approve or decline your application. If approved, you’ll receive details about the loan terms, including the interest rate, amount, and repayment schedule.

Loan pay-out: Once you’ve accepted the loan terms, the finance company will transfer funds to the seller or dealership, allowing you to complete the purchase of your new set of wheels.

Paying for a new car: managing your loan responsibly

With the loan secured and a set of keys in your hands, it’s time to focus on repayments. Here are some tips for managing your loan responsibly:

Budgeting: Incorporate your loan payments into your monthly budget to ensure you can afford them comfortably. Prioritise your payments over other less-important expenses to avoid defaulting on your loan and dragging down your credit score.

Automatic payments: Consider setting up automatic deposits when paying for a new car. This will ensure your loan payments are made on time. This can help you avoid late fees and maintain a stellar payment history.

Extra payments: If possible, consider making extra payments towards your principal loan amount. This will help you pay off the loan faster and reduce the total interest paid.

Communication: If you run into financial difficulties or anticipate missing a payment, communicate with your lender proactively. They will be more understanding than you might think and can usually offer assistance or alternative payment arrangements to help you avoid defaulting.

Drive towards success with My Car Credit

Whether you’re looking to lease a brand-new Nissan Leaf or work towards full ownership of a used Toyota Highlander, paying for a new car with a loan can open new doors when it comes to getting behind the wheel. At My Car Credit, we’re riding shotgun to help you understand the basics of car loans, choose the right product for your needs, navigate the application process, and manage repayments responsibly – so you can get behind the wheel with confidence.

Try out our fantastic online car finance calculator to see an instant breakdown of your expected monthly payments, typical rate and total payable.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

HP, Conditional, PCP: The Lowdown on Car Finance Options

How Do Car Finance Calculators Work?

Can I Give My Car Back to the Finance Company?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

application application process car finance car finance options car loan Jan24 lender repayments used car

PCP: Is It Worth It?

Man driving nearly-new car bought using PCP finance

PCP is one of the most popular types of car finance agreement. Flexible and affordable, it’s among the best ways to get behind the wheel of a new, nearly-new or used car.

This article will break down what PCP car finance is, what you can expect of your agreement, and answer the question – is PCP worth it?

What is PCP car finance?

Personal contract purchase (PCP) car finance is one of the most sought-after car finance options.

PCP allows you to split the cost of your car into a series of affordable monthly repayments (plus interest), as well as a deposit and an optional final payment – also called a balloon payment. It offers lower monthly repayments and a lower deposit compared to other kinds of car finance agreements.

These monthly repayments are lower because a higher proportion of the loan is deferred until the optional final payment. This is a lump sum you’ll need to pay the lender to own the car outright.

This lump sum or balloon is calculated based on what’s called your car’s guaranteed future value or GFV. The GFV is calculated according to a forecast of the vehicle’s value at the end of the agreement. This forecast is based on factors like the car’s anticipated mileage – so if you breach this figure or incur excessive vehicular wear and tear, you can face hefty fines.

The length of a PCP agreement is typically anywhere from 24 to 36 months or three to five years. The longer the term of your PCP finance agreement, the lower your optional balloon payment will typically be. This is because newer models of cars will have a higher financial value by comparison.

What are the advantages and disadvantages of PCP?

+ Lower monthly repayments and deposit

Compared to other car finance agreements, PCP has a lower deposit and monthly repayments.

Plus, there’s more flexibility compared to other agreements – you have the option to pay the car off early or negotiate around the end of the repayment term.

+ Possibility of making a profit on your car

Your car’s GFV is a fixed value – it can’t change, even if the car is worth less at the end of your agreement than its GFV.

On the other hand, this can mean that your car is worth more at the end of your PCP agreement than its GFV. This puts you in positive equity, which you can leverage to your advantage. You could part exchange the car for a newer model and put this positive equity towards the deposit of your next car, for example.

Alternatively, you can pay the final balloon including a small option to purchase fee and sell the car on yourself, pocketing the difference.

+ Ideal for regularly upgrading your vehicle

The final balloon payment of a PCP agreement is optional – you don’t have to pay it. Provided that you haven’t exceeded the vehicle’s mileage limit or caused undue wear and tear, you can hand the keys back at the end of the agreement.

This is great for people who like regularly updating their car for newer, higher spec models. Plus, it means that if your vehicle has a lower GFV through no fault of your own, you don’t front the cost.

+ Balloon payment financing

If you want to make the final optional payment to own the car outright but aren’t sure you can afford it, you have options. Balloon payment financing works like any other car finance agreement – you break the cost of the balloon into affordable chunks, plus interest.

– Usage restrictions

With PCP, you defer a significant portion of the car’s value until the final balloon payment. As explained above, this lump sum is calculated based on the car’s anticipated mileage and usage.

If you breach these usage restrictions and cause excessive wear and tear on the vehicle, you’ll impact its overall GFV. The car will then be worth less at the end of your PCP agreement than estimated. You’ll subsequently face penalties for breaching usage restrictions.

PCP: is it worth it?

Whether PCP is worth it depends on what you want from your car finance. One of the main appeals of car finance is the variety of agreements. The right one for you is contingent on your needs and circumstances.

Thinking of starting your car buying journey? Try out our handy online car finance calculator to crunch the numbers on your next car.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

What Happens if I Can’t Pay My Balloon Payment?

What is a Guarantor Loan?

PCP Finance Explained – Personal Contract Purchase Guide

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

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Car Repayments Explained

Woman calculating her car repayments on a calculator

From daily commutes to weekend adventures, car repayments offer unmatched freedom and convenience. However, for many Brits, understanding the ins and outs of auto finance can feel like navigating a six-lane motorway.

This is where we’re here to help. Read on as we unpack car repayments and explain everything you need to know about loan options, the application process, repayment strategies and more.

Decoding car repayments: key concepts

Understanding auto finance car repayments begins with a few fundamental concepts. Here are some bite-sized definitions of the most important terms you need to know:

Loan principal: This is the base amount you borrow to purchase your vehicle. It doesn’t include the down payment or any value you might get from trading in your old car.

Interest rate: This is what the lender charges for the money-borrowing service they provide. It’s typically expressed as a percentage. Shopping around for the best interest rate is important, as it determines how much extra you’ll pay on top of the loan principal car repayments.

Loan term: This is the duration over which you agree to pay back the loan. While a longer term can reduce your monthly payments, it might increase the total amount of interest you’ll pay over the life of the loan.

Monthly payments: These are what you’ll pay each month, made up of both the principal amount and the interest. The amount is influenced by how much you borrow, the interest rate and the term of your loan. Monthly car repayments may also include other fees applied by the lender.

Understanding different loan options

When it comes to financing your car, there are several routes you can take. Here’s a closer look at some of the most popular car repayments options in the UK:

Hire Purchase (HP)

This straightforward finance plan involves putting down a deposit (although there are plenty of zero deposit options), followed by fixed monthly car repayments. Once you’ve made all the payments, the car is yours to keep. Hire purchase is perfect for those who want to own their car outright at the end of the agreement.

Personal Contract Purchase (PCP)

PCP keeps monthly payments lower by postponing a significant portion of the loan to the end of your agreement. This final chunk is known as a balloon payment, but you’re not necessarily obliged to fork out. When your PCP agreement ends, you can choose to return the car, providing the car is in good working order and within the annual contracted mileage, swap it for a new one or pay the balloon payment along with a small option to buy fee to own the vehicle outright. Flexibility is one of the biggest benefits of PCP car repayments.

Personal Contract Hire (PCH)

Think of PCH as a long-term rental. You pay a fixed monthly fee to use the car but must return it at the end of the term. It’s great for those who like driving newer models and don’t want the hassle of selling the car later.

Personal Loans

These are unsecured loans that give you a lump sum to buy your car. Interest rates might be higher, but they offer more flexibility and aren’t secured against your vehicle.

Navigating the application process

Here’s what to expect when you apply for car finance:

Documents and personal information: You’ll need to gather multiple documents, such as proof of identity, proof of income and details about the vehicle you intend to purchase.

Credit check: Lenders will check your credit score to determine your financial reliability. A healthy credit score usually means more favourable loan terms. Pro tip: when shopping around for car finance some brokers will carry out credit checks to determine your eligibility. Always look for a broker that runs an initial ‘soft’ check that won’t leave a mark on your credit history. Please note however, that should you progress, some lenders may perform a hard search on your credit file.

Approval decision: After reviewing your documents and credit score, the lender will either approve or reject your application. If approved, they’ll clearly outline the loan terms and your car repayment schedule.

Loan pay-out: Once you agree to the terms, the lender will pay out the money to the car seller or dealership.

Savvy car repayment strategies

Car repayments open exciting new doors when it comes to getting behind the wheel. Many Brits are eligible, even with less-than-perfect credit scores. But it’s important to understand your responsibilities as a borrower and keep up with your car repayments. To handle your car loan responsibly, consider the following strategies:

Set a realistic budget

Make sure your monthly car repayments fit comfortably within your budget. It’s better to adjust your budget now than struggle later.

Automate payments

Setting up automatic car repayments can prevent late fees and helps keep your credit score healthy.

Make additional payments

If you can afford it, pay more than the minimum amount each month to reduce interest in the long run and shorten your loan term.

Communicate with your lender

If you hit a financial snag, talk to your lender early to discuss potential adjustments to your payment plan.

A firm grip on the basics of car repayments and a good understanding of different financing options can help you steer clear of common pitfalls and make choices that suit your financial situation, as well as your goals as a motorist.

Simplified auto finance with My Car Credit

Whether you’re eyeing a brand-new Ford Puma equipped with hybrid technology, a versatile Kia Sportage or a zippy Volkswagen Golf, the My Car Credit team is here to help you make smart, informed decisions when it comes to car repayments. This not only puts you in the driver’s seat regarding your financial health but helps ensure a smoother ride in your automotive journey.

So, don’t let finance fears keep you from enjoying the road. Use our handy online car finance repayment calculator to start your journey towards that new car.

Rates from 9.9% APR. Representative APR 10.9%

Evolution Funding Ltd T/A My Car Credit

Can You Pay Monthly for a Used Car?

What Does ‘Finance’ Mean When Buying a Car?

PCP: Is It Worth It?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 10.9%, annual interest rate (fixed) 10.87%, 47 monthly payments of £191.50 followed by 1 payment of £201.50 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,702, total amount payable £9,202.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

application car finance car finance options Jan24 lender repayments used car

Understanding hire purchase (HP)

Why consider no deposit HP?

Top benefits of no deposit hire purchase

Things to consider

Securing a no deposit hire purchase agreement

1. Compare lenders

2. Credit check

3. Understand the full terms

Find no deposit hire purchase deals with My Car Credit

Rates from 9.9% APR. Representative APR 10.9%

Related articles

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There are many kinds of car finance. The right one for you will depend on your unique needs and circumstances.

What is PCP car finance?

How does PCP work at the end of term?

What to do at the end of your PCP term

Make the balloon payment

Return the vehicle

Part exchange the vehicle

I can’t afford my end-of-term PCP payment – what do I do?

Discover if PCP finance is right for you with My Car Credit

Rates from 9.9% APR. Representative APR 10.9%

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From sidestepping initial depreciation to avoiding long waitlists, used cars come with myriad benefits.

Step 1: Assess your financial situation

Step 2: Choose the right vehicle

Step 3: Shop around for the best deals

Step 4: Understand the terms

Step 5: Finalise the loan and purchase your car

Step 6: Repayment and beyond

Rates from 9.9% APR. Representative APR 10.9%

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Car finance continues to appeal to drivers across the UK because it’s a flexible, affordable way of funding the purchase of a new, nearly-new or used set of wheels.

What you need to know about a PCP term

How does the end of a PCP term work?

Find out more about PCP finance today

Rates from 9.9% APR. Representative APR 10.9%

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Whether you’re buying your first car or upgrading an existing set of wheels, purchasing a new vehicle is exciting. But for many Brits, the question of how to bankroll it can be daunting.

Understanding car loans: the basics

Choosing the right loan

Types of car loans

The application process: what to expect

Paying for a new car: managing your loan responsibly

Drive towards success with My Car Credit

Rates from 9.9% APR. Representative APR 10.9%

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PCP is one of the most popular types of car finance agreement. Flexible and affordable, it’s among the best ways to get behind the wheel of a new, nearly-new or used car.

What is PCP car finance?

What are the advantages and disadvantages of PCP?

+ Lower monthly repayments and deposit