• car finance personal leasing

Consumer Car Finance Explained

With so many new car finance deals available, from such a wide range of providers, it can be difficult to know which option to choose. In this blog we guide you through some of the key questions you need to answer, to discover what type of finance best meets your needs.

Do you have sufficient savings to buy a new car outright?

In today’s climate of very low savings interest rates, if you’re lucky enough to have the cash to buy a new car outright then this could be the cheapest option. Take a careful look at the interest rate that you are earning and compare this to the interest rate charged on any type of finance – it’s highly likely that the interest you lose from your savings will be less than you pay for car finance.

Of course, this isn’t the only consideration. Many people hold savings for security reasons or have plans for the money that don’t involve a new car, in which case using one of the many finance options available will be a better solution. But it’s worth remembering that, if you do own the car outright, you always have the opportunity to sell it if you need to raise money.

Do you want to carry the risk of the car’s future value?

If you do buy a car using your own cash, then you carry all of the risk of what the car will be worth when you come to dispose of it (the car’s residual value). The same is true if you take out a loan or use Hire Purchase (HP) to buy the car.

If you would rather let someone else worry about residual values, then there are finance options available that remove this risk. With both Personal Contract Purchase (PCP) and Personal Contract Hire (PCH), the provider of the finance carries this risk, effectively guaranteeing the car’s value at the end of the finance term.

new car personal contract hire

Do you want to own the car outright at any point?

Obviously, if you buy the car with cash, either from your own savings or from a loan, then the car will belong to you from day one. Other types of finance offer different ownership propositions. With Hire Purchase, you will legally own the vehicle once the final payment has been made to the finance provider.

With PCP you have the option of taking ownership at the end of the agreement term by making a ‘balloon payment’. This size of this payment will be fixed at the outset of the agreement and will depend on a number of factors, including the value of the vehicle, it’s rate of depreciation and the size of the monthly repayments throughout the contract.

With PCH there is no contractual option to take ownership at the end of the term. The assumption is that the vehicle will be returned and you will seek another deal. Obviously, if you were keen to take permanent ownership, you may still be able to negotiate a purchase price with the finance provider.

Do you have a good credit rating and can you afford the repayments?

Generally speaking, the better your credit rating, or credit score, the better the finance deal you’ll be able to access and the more money you’ll be able to raise. You’ll also need to prove to the lender that you’re able to afford the repayments over the term of the agreement.

If at any stage of a car finance agreement you begin to struggle with repayments it is always good advice to contact the lender, as they may be able to restructure the deal to make it more affordable. If you default on the payments for any finance that is secured on the value of the car (including HP, PCP and PCH), then ultimately the provider may be able to repossess it.

How would you like to ‘shape’ your repayments?

This might sound like a strange question, but with the range of finance deals on offer today, you can pretty much define the size of your initial payment (deposit) and monthly repayments to suit your requirements. HP, PCP and PCH finance deals can all be found that offer this flexibility.

You’ll often see PCP and PCH deals quoted as, for example, a 3+23 month or 6+35 month contract. These figures refer to the size of the deposit and number of subsequent monthly payments required. So, a 3+23 month contract will require a deposit of three times the monthly payment amount, followed by 23 further monthly repayments.

If you’ve got a large deposit, you may be able to access a zero percent APR deal; these are most common on HP but are also offered on PCP from time to time. Even if there are no zero percent deals around, a larger deposit means you’re more likely to be able to access lower interest rates.

Very low, or no-deposit, deals are also available, particularly on PCP and PCH, but these usually carry a higher interest rate and higher monthly payments.

When comparing rates, remember that Representative APRs are the lowest rate that 51% of people accepted for the finance will get, you may pay more depending on your circumstances. It’s also worth noting that PCH deals do not quote an APR, as they are effectively a lease and not a loan.

Whatever ‘shape’ of finance deal on offer, it’s essential that you know how much you’ll be paying in total. This means adding up the initial deposit amount, plus all the monthly payments and any balloon payment at the end of the contract. Obviously with HP and PCP the total payable will actually mean you’ve taken ownership, whereas with PCH you’ll hand the car back.

Many finance deals also come with set-up fees, sometimes referred to as administration or documentation fees. It’s worth looking at all of the small print to find out how much this will add to the overall cost of finance.

How long do you want to run the car for?

If you’re buying the car of your dreams and intend to keep it for many years, then you’ll need to either purchase it outright or choose a method of finance that allows you to take ownership at the end of the contract. In the more likely scenario that you plan to keep the car for a number of years and then replace it with a new one, almost any of the finance options become valid.

HP deals tend to be between one and five years in length, while PCP and PCH are more likely to be between two and four years, but longer contracts are available.

Car driving

How many miles are you likely to cover each year?

For finance methods where the provider takes the residual value risk (PCH and PCP), you’ll be expected to declare how many miles you’ll cover each year. This is because the total number of miles covered during the contract period will have a large impact on how much the car is worth at its conclusion. With HP or a loan, you retain the residual value risk so are free to cover as many miles as you want.

If it looks like you’ll do more miles than you originally thought, it’s worth letting the finance provider know so that they can adjust your monthly PCP or PCH payments accordingly. This will prevent you getting a large excess mileage bill at the end of the term.

Are you interested in including car tax and maintenance?

Nearly all PCP and PCH deals come with car tax included in the regular payments, this isn’t the case for cars purchased through a personal loan or most HP deals. PCP and PCH are usually sold with the option of including maintenance and tyres within the package. This means you’ll pay a little more each month but won’t have to worry about the cost of routine servicing and repairs.

It’s worth considering how much maintenance a brand-new car is likely to require during its first few years on the road and how much this is likely to cost before ticking the maintenance option box.

Is there a chance you’ll want to dispose of the car sooner than currently planned?

If you are really unsure about how long you’ll want to keep the car, then the best option is to buy it outright with savings or a personal loan. This means that you own the car from the outset, so you’ve got full rights to sell it whenever you choose.

HP, PCP and PCH are all agreements that last for a specified period of time, so ending them early will require you to meet certain contractual obligations. We’ll look at each in turn to see what options are available.

With PCH it depends on exactly what’s stated in your contract and on the attitude of the leasing company. Some will hold you to all of the outstanding monthly payments even if you hand the car back, while others will try to assess the situation and let you end the contract for a smaller payment.

In this scenario, the amount you can expect to pay to terminate early will depend on how far into the contract you are, the mileage covered and the car’s condition. The earlier in the contract you leave, the higher the amount you’re likely to have to pay. This is because the car loses value faster earlier in the contract period than later, but rentals are calculated to be flat through the whole period. If you just want to reduce your monthly PCH outgoings, the provider might suggest extending the length of the agreement, they might also be able to defer payments for a period of time.

With PCP and HP you do have a little more flexibility through ‘voluntary termination’. You are able, in law, to hand back the car to the finance company if you have already paid back 50% of the loan amount plus any interest and other fees that might apply.

If you have paid off less than 50% you will be expected to make up this shortfall before you hand back the car. Where more than 50% has already been repaid then this money will be lost if you return the car.

Will you be able to return the car in good condition?

Regularly maintaining your car and keeping it in good overall condition is just common sense. If you’ve purchased the car outright, or are on a finance deal where you take the residual value risk such as HP, then neglecting its upkeep is simply going to cost you money when it comes to disposing of it.

Under PCP and PCH deals you’ll be contractually obliged to follow the manufacturer’s servicing schedule, as following this will enhance the car’s value at the end of the term when you hand it back. You will also be expected to return the vehicle with no damage that falls outside of expected wear and tear for a vehicle of that age. The rules for this are outlined in the BVRLA’s fair wear and tear guidelines.

If the vehicle is returned with damage that’s deemed to be outside of these guidelines, then you will be charged an amount to compensate the finance provider for the cost of rectifying any damage, or for missing items such as keys or service history.

There are, of course, circumstances where vehicle damage is more likely. This could be due to where you live (e.g. high chance of vandalism or poorly maintained roads), or how the vehicle is used. If there’s a high chance of damage it could be worth considering an alternative to PCH or PCP, or budgeting for the repair work to be carried out before handing the car back.

Do your research

No two situations are the same, so there’s no car finance solution that will be the best fit for everyone. Do carry out your own research with dealerships and online and shop around for the best deals on the car you’re looking for. When you’ve found a deal, if you’re not totally sure about what you’re signing up for don’t be afraid to ask questions to get clarification.

Maxxia offers personal car finance with deals on cars from all manufacturers plus a range of special offer vehicles. If you’d like to speak to someone about your specific requirements, call us on 01908 219398.

2021-01-22T08:58:56+00:00January 16th, 2020|Categories: Asset Finance, Cars, Contract hire, Vehicle Finance|

Share This Story, Choose Your Platform!


  1. takipçi satın al November 10, 2021 at 10:52 am - Reply

    Hello! Do you know if they make any plugins to assist with Search Engine Optimization? I’m trying to get my blog to rank for some targeted keywords but I’m not seeing very good success.
    If you know of any please share. Many thanks!

  2. takipci al November 10, 2021 at 8:57 am - Reply

    I am genuinely happy to read this weblog posts which carries plenty of useful information, thanks for providing such information.

  3. Takipçi satın al November 10, 2021 at 1:35 am - Reply

    There is certainly a lot to know about this issue.
    I really like all of the points you have made.

  4. Humberto October 18, 2021 at 5:09 pm - Reply

    Hello, I wish for to subscribe for this website to obtain most recent updates, thus where can i do it please help.

  5. Madeline October 9, 2021 at 1:27 pm - Reply

    Hi there it’s me, I am also visiting this
    web site regularly, this website is in fact good and the
    viewers are really sharing fastidious thoughts.

  6. Ronnie October 9, 2021 at 6:59 am - Reply

    Hmm is anyone else encountering problems with the pictures on this blog loading?
    I’m trying to determine if its a problem on my end or if it’s
    the blog. Any feedback would be greatly appreciated.

  7. Cyril October 9, 2021 at 4:08 am - Reply

    I enjoy reading through a post that can make people think.
    Also, many thanks for allowing for me to comment!

  8. situs slot online terbaik 2020 October 9, 2021 at 3:35 am - Reply

    It’s really a cool and useful piece of information. I’m
    glad that you simply shared this helpful information with us.
    Please keep us informed like this. Thanks for sharing.

  9. judi slot online terpercaya October 9, 2021 at 3:26 am - Reply

    This text is invaluable. When can I find out more?

  10. This is a topic which is close to my heart… Many thanks!
    Where are your contact details though?

  11. slot online deposit pulsa October 9, 2021 at 3:12 am - Reply

    Wow, incredible blog structure! How lengthy have you been blogging for?
    you make running a blog look easy. The overall glance of your
    site is great, let alone the content material!

  12. slot pragmatic bet murah October 9, 2021 at 3:10 am - Reply

    Wow, that’s what I was exploring for, what a stuff! present
    here at this web site, thanks admin of this
    web page.

  13. These are really great ideas in on the topic of blogging.

    You have touched some fastidious points here. Any way keep up wrinting.

  14. situs judi slot online October 9, 2021 at 2:55 am - Reply

    Right here is the perfect webpage for anyone who really wants
    to find out about this topic. You realize a whole lot its almost hard to argue with
    you (not that I personally will need to…HaHa). You certainly put a fresh spin on a subject
    which has been written about for years. Great stuff, just great!

  15. link mpo slot terbaru October 9, 2021 at 2:48 am - Reply

    Truly no matter if someone doesn’t know afterward its up to other viewers that they
    will assist, so here it happens.

  16. situs judi slot online terbaik October 9, 2021 at 2:46 am - Reply

    I was recommended this web site by my cousin. I am not sure whether this post is written by him as no one
    else know such detailed about my problem. You are incredible!

  17. slot pragmatic bet murah October 9, 2021 at 2:46 am - Reply

    Very good information. Lucky me I recently found your blog by chance (stumbleupon).
    I’ve book marked it for later!

  18. Hey There. I found your blog using msn. This is an extremely well written article.
    I’ll be sure to bookmark it and come back to read more of your
    useful information. Thanks for the post. I’ll certainly comeback.

  19. situs slot online terbaik 2020 October 9, 2021 at 2:44 am - Reply

    Terrific post however , I was wondering if you could write a litte more on this subject?
    I’d be very thankful if you could elaborate a little bit more.

  20. situs judi slot terbaik October 9, 2021 at 2:39 am - Reply

    Hi there just wanted to give you a brief heads up and let you know a few of the pictures aren’t loading properly.
    I’m not sure why but I think its a linking issue. I’ve tried it in two different internet browsers and
    both show the same results.

  21. slot online deposit pulsa October 9, 2021 at 2:37 am - Reply

    Thanks for your personal marvelous posting! I certainly enjoyed reading it, you
    could be a great author. I will make certain to bookmark your
    blog and will eventually come back later on. I want to encourage you to definitely continue your great posts, have a nice afternoon!

  22. kumpulan situs slot online October 9, 2021 at 2:32 am - Reply

    Thanks in support of sharing such a good opinion,
    piece of writing is good, thats why i have read it completely

  23. slot pragmatic bet murah October 9, 2021 at 2:30 am - Reply

    Hey there! Do you use Twitter? I’d like to follow you if that
    would be ok. I’m definitely enjoying your blog and look forward to new updates.

  24. I for all time emailed this webpage post page to all my friends,
    as if like to read it afterward my friends will too.

  25. slot depo pulsa tanpa potongan October 9, 2021 at 2:20 am - Reply

    I have read so many articles regarding the blogger lovers however this article is truly a fastidious post, keep it up.

  26. situs slot online terbaik 2021 October 9, 2021 at 2:20 am - Reply

    If you are going for best contents like myself, only visit
    this website all the time since it gives quality contents, thanks

  27. kumpulan situs slot online October 9, 2021 at 2:17 am - Reply

    If some one wants expert view about running a blog then i advise him/her
    to visit this blog, Keep up the fastidious work.

  28. judi slot pragmatic play October 9, 2021 at 2:10 am - Reply

    Marvelous, what a blog it is! This webpage presents useful
    information to us, keep it up.

  29. demo slot pragmatic play October 9, 2021 at 1:58 am - Reply

    I really like your blog.. very nice colors & theme.
    Did you design this website yourself or did you hire someone
    to do it for you? Plz respond as I’m looking to construct my own blog and would like to
    know where u got this from. thank you

  30. Siobhan October 8, 2021 at 5:36 pm - Reply

    Everything is very open with a very clear description of the challenges.
    It was truly informative. Your website is extremely helpful.
    Thanks for sharing!

  31. Chad October 8, 2021 at 4:15 pm - Reply

    I really like what you guys are up too. This sort of clever work and coverage!
    Keep up the amazing works guys I’ve incorporated you guys to our blogroll.

  32. Laurel October 8, 2021 at 3:45 pm - Reply

    Hey very cool blog!! Guy .. Excellent .. Amazing ..
    I will bookmark your site and take the feeds additionally?
    I am happy to search out so many helpful information here within the publish, we want develop
    more strategies in this regard, thank you for sharing.
    . . . . .

  33. خرید کتاب زبان اصلی October 8, 2021 at 1:16 pm - Reply

    Hmm it looks like your site ate my first comment (it was
    super long) so I guess I’ll just sum it up what I submitted and say,
    I’m thoroughly enjoying your blog. I as well am an aspiring blog blogger but I’m still new to the whole
    thing. Do you have any tips for first-time blog writers? I’d really appreciate it.

  34. slot pragmatic bet murah October 8, 2021 at 8:06 am - Reply

    Hi there colleagues, how is everything, and what you wish for to say on the topic of this piece of
    writing, in my view its actually remarkable in support of me.

  35. Hey very interesting blog!

  36. whoah this blog is wonderful i really like studying your posts.

    Stay up the great work! You realize, many persons are looking around for this information, you could aid them greatly.

  37. Liberty Slots Casino October 8, 2021 at 6:03 am - Reply

    Wonderful beat ! I would like to apprentice even as you amend your
    web site, how could i subscribe for a weblog website? The account aided
    me a acceptable deal. I have been a little bit familiar of
    this your broadcast provided bright clear concept

  38. Olá , você também está usando o wordpress como plataforma
    do seu site ? Eu sou novo no mundo do blog, mas
    estou querendo criar o meu próprio. Você aprendeu alguma código para fazer seu
    próprio blog? Qualquer ajuda seria realmente útil!

  39. Darby October 8, 2021 at 2:00 am - Reply

    Hi, I do believe this is a great web site. I stumbledupon it 😉 I will revisit yet again since I book-marked it.
    Money and freedom is the greatest way to change,
    may you be rich and continue to help other people.

  40. gematodiatrofi.hua.gr October 7, 2021 at 4:28 am - Reply

    Thank you for sharing with us, I believe this website truly stands out :D.

  41. Myra October 7, 2021 at 12:08 am - Reply

    Heya i am for the first time here. I found this board and I in finding It really
    useful & it helped me out a lot. I’m hoping
    to provide one thing back and help others such as you helped me.

  42. https://pastebin.fun/ October 6, 2021 at 1:54 am - Reply

    Hey There. I found your blog using msn. This is an extremely well written article.
    I will be sure to bookmark it and return to read more of your useful info.

    Thanks for the post. I’ll definitely return.

  43. Jeffry September 29, 2021 at 7:25 pm - Reply

    Some really nice stuff on this web site, I love it.

  44. Stephan September 28, 2021 at 9:43 pm - Reply

    It’s an amazing paragraph designed for all the online viewers; they will get advantage from it I am sure.

  45. Melinda September 28, 2021 at 9:21 pm - Reply

    Thank you for another informative blog. Where else may just I get that kind of information written in such
    an ideal method? I’ve a venture that I’m simply now operating
    on, and I’ve been on the glance out for such information.

  46. Yetta September 28, 2021 at 9:08 pm - Reply

    Hi, its pleasant paragraph concerning media print, we all be
    familiar with media is a wonderful source of data.

  47. Jacinto September 28, 2021 at 8:35 pm - Reply

    Howdy! This is my first visit to your blog! We are a group
    of volunteers and starting a new project in a community in the same niche.
    Your blog provided us useful information to work on. You
    have done a wonderful job!

  48. Alisia September 28, 2021 at 8:23 pm - Reply

    I quite like reading an article that can make men and women think.
    Also, thanks for permitting me to comment!

  49. Korey September 28, 2021 at 8:09 pm - Reply

    I want to to thank you for this wonderful read!!
    I definitely enjoyed every bit of it. I have got
    you saved as a favorite to check out new stuff you post…

  50. Louie September 28, 2021 at 6:59 pm - Reply

    Do you have a spam issue on this website; I also am a blogger, and
    I was curious about your situation; we have developed some nice practices and we
    are looking to trade strategies with other folks, please shoot
    me an e-mail if interested.

  51. https://blogfreely.net September 28, 2021 at 5:44 pm - Reply

    I got what you intend,saved to bookmarks, very decent web site.

  52. Liliana September 28, 2021 at 4:51 pm - Reply

    What’s Happening i’m new to this, I stumbled upon this I have found It positively
    useful and it has helped me out loads. I’m hoping to
    contribute & help other customers like its aided me.
    Good job.

  53. Alina September 28, 2021 at 4:42 pm - Reply

    I go to see day-to-day some blogs and blogs to read articles,
    but this weblog gives feature based articles.

  54. Wyatt September 28, 2021 at 12:54 pm - Reply

    Fine way of explaining, and good article to take data about my presentation subject matter,
    which i am going to convey in university.

  55. GGBet спорт September 28, 2021 at 10:37 am - Reply

    Зарегистрированные игроки смогут на сто процентов
    легально открыть ставку на киберспортивные дисциплины в GG Бэт,
    очень быстро снимать выигрыши. Данная букмекерская контора устанавливает довольно
    большие коэффициенты, раздает пользователям бонусы и подарки.

    Другие важные достоинства данного ресурса: